Hi Everyone, I am an Indian, I came Malaysia on EP on 31st Oct 2014.
And I got Work Permit on 18th Nov 2014 and it is valid till 31st Oct 2015.
I have 3 queries, Please guide me.
1. I want to know about the either am I eligible for pay tax as residence for 2014 basis year or not?
I am planning to go out of Malaysia from 27th Jan 2015 to 9th Feb 2015. (12 days out of Malaysia - excluding departure & arrival dates) to my home country India.
2. If I will drop my plan and I will be staying continuously till 30th April 2015, so am I eligible for 2014 as resident in Malaysia for tax purposes. (As per my understanding). [Because I will be completing consecutive 182 days on 30th April]
If I will be not available (for 12 days) in Malaysia before completing 182 consecutive days (i. e.before 30th April 2015) and I will be visiting India(home country) for vacation.
As per website document, temporary absence is allow but if temporary absence is social visit, & it should not be exceeding fourteen days in the aggregate.
3. So is my temporary absence consider as social visit & is it count in 182 consecutive days?
If I will get Tax Resident for 2014 & 2015, so then can I file tax return for both year in 2016 March?
As per residence individual clause 7(1)b in IRBM, i.e.
agc.gov.my/Akta/Vol.%202/Act%2053.pdf
hasil.gov.my/pdf/pdfam/individual.pdf
ey.com/Publication/vwLUAssets/Worldwide_Personal_Tax_Guide_2013-2014/$File/2013-2014%20Worldwide%20personal%20tax%20guide.pdf (Page no 791)
-----------------------
7.
(1) For the purposes of this Act,
an individual is resident in
Malaysia for the basis year for a particular year of assessment if—
(a) he is in Malaysia in that
basis year for a period or
periods amounting in all to
one hundred and eighty-
two days or more;
(b) he is in Malaysia in that basis year for a period of less
than one hundred and eighty-two days and that period
is linked by or to another period of one hundred and
eighty-two or more consecutive days (hereinafter
referred to in this paragraph as such period)
throughout which he is in Malaysia in the basis year
for the year of assessment immediately preceding that
particular year of assessment or in that basis year for the year of assessment immediately following that
particular year of assessment:
Provided that any temporary absence from
Malaysia—
(i) connected with his service in Malaysia and owing to service matters or attending conferences or seminars or study abroad;
(ii) owing to ill-health involving himself or a
member of his immediate family; and
(iii) in respect of social visits not exceeding fourteen days in the aggregate,
shall be taken to form part of such period or that
period, as the case may be, if he is in Malaysia
immediately prior to and after that temporary absence;
Is temporary visit to home country consider as social visit ?
2014 - you were non tax resident.
2015 - the 182 days qualifying period starts on 1st January 2015.
Worst scenario your 182 day count for 2015 starts when you return on 9th February and you have broken the link between 2014 and 2015 and would not be entitled to tax equalisation for 2014 i.e. tax refund of difference between normal rates and the flat rate of 26% which you presumably have been paying?
Your visit to Indian is a social visit for tax purposes and as I dont know your travel schedule its hard to comment. A tax "day" is usually where you are at midnight when counting days of absence or presence. You are sailing close to the wind with your absence but cant comment further on that as I dont know the details.
Flat rate for 2015 is 25%.
Thanks Gravitas
But we have a relaxation of 14 days as social visit in between of 182 days,
even if I am leaving Malaysia on 27th and returning on 9th Feb i.e total days would be 14 days for eg. 27, 28, 29, 30 ,31, 1, 2, 3, 4 ,5 ,6, 7, 8, 9.
If this is 14 days. is there any clause or condition which conflicts this.
As per 1(A) clause on IRBM Website i.e
hasil.gov.my/pdf/pdfam/individual.pdf
1A) For the purposes of subsection (1), an individual shall be deemed to be in Malaysia for a day if he is present in Malaysia for part of that day and in ascertaining the period for which he is in Malaysia during any year, any day (within paragraphs 1(a) and (c)) for which he is in Malaysia shall be taken into account whether or not that day forms part
of a continuous period of days during which he is in Malaysia.
Please help me to understand this clause.
If I will change the plan instead of leaving 27th if I would leave on 28th that would be better?
My travel schedule is I have flight at 10:30PM on 27th for India and I will be return at 6:30AM on 9th Feb.
So you are in Malaysia on 27th and 9th. That makes your absence from Malaysia only 12 days. Good that you found the official wording about "day" for Malaysia. I had not seen that before.
The main point of the earlier comment was to point out that the 182 days does not cross over from one year to the next. Your 2015 tax residency status is only based on presence in Malaysia in that calendar year. By taking the trip you mention, you probably cannot leave Malaysia again in 2015 for social purposes, as you only have 2 days to spare i.e. they use the word "cummulative".
A few years back the rules did not include visits to "home" but I guess this loophole was closed to avoid confusion and now ANY absence for social reasons is noted by the tax authorities.
So Should I stick to my plan or make any changes in that like extent leaving day to 28th morning?
Because if any case, the tax officer count "out of Malaysia" days will 13 days only (if he may not understand this clause properly). [As my HR told me that tax return is depends on Accessing officer in IRBM Tax department, they don't know their tax clause properly and they do what they understand or assume, so better to be in safer side]
As you mentioned in your last comment "By taking the trip you mention, you probably cannot leave Malaysia again in 2015 for social purposes"
As per my understanding after reading this [ http://www.hasil.gov.my/pdf/pdfam/individual.pdf ], I need to complete 182 days in 2015 to take resident in Malaysia for 2015, but I didn't completed 182 days in 2014 so I need to complete consecutive 182 days in Malaysia in 2015, unfortunately I also get resident for both year 2014 & 2015(i.e in first half of year from 1st jan to 1st July including 14 days social visit).
After that I can go out of Malaysia as many times I want.
But again If I want to take resident fro 2016, I should be prepare from half of 2015 ..in that case I could not go more than 14 days out of Malaysia in 2nd half of 2015, so I will be tax resident (for 2016) on 1st Jan 2016.
As per http://www.hasil.gov.my/pdf/pdfam/individual.pdf , social visit would be count in consecutive days.
And I read old document where it mentioned that "social visit exception to home country is allow for 14 days", but in latest documents I didn't find the "home exception clause". [So I think Malaysian Govt had removed this exception after 2012].
So it means out of Malaysia for upto 14 days is social visit and that is count in 182 consecutive days, otherwise counter goes to 0.
I dont think you need to change your plans as you can always appeal a tax decision.
As long as you become tax resident in 2015, which is likely are you have an ongoing EP, you can then claim over tax payment for 2014 and 2015 when you file your return in April 2016.
You will never be deemed tax resident for 2014 as you did not complete the required number of days. However, as above, if it is linked to another period of 182 days with no break of more than 14 days between the tax periods 2014-15 i.e. a person goes on holiday at Christmas and NY and is away for more days that allowed, the linkage is severed. A lot of people, especially teachers, get caught out by this clause and go away in the school holiday and realise they have ruined their tax continuity. It is only relevant in the first two tax years, as mostly they come in about August, which is outside the period of being able to achieve tax residency for the first year.
I think you are right about the absences the rest of the year, on reflection. the aggregate (not accumulative) is interesting statement though as it means "amounting to a whole" and total could have been used. But then I guess aggregate means total of a particular social absence and not a whole in the tax year. Legal wordings are always tricky.
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