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May 01, 2023



A public ruling no. 9/2019 was published by “Inland Revenue Board of Malaysia” regarding the residence position of corporations and “bodies of person”. The ruling explains that, a company or the body of persons will be considered as Malaysian resident on the basis of year for assessment purpose given that at any point of time throughout the “basis year” the administration along with the “control of business” or any single of its businesses activities are exercised in Malaysia (Kaur 2016). A corporation or a “body of person” even though not conducting trade or businesses in Malaysia but its business activities are performed by its directors in Malaysia or other regulatory authority will be considered as Malaysian resident.

On the basis of aforementioned ground, the management and control implies to authorities that impose control to ascertain the policies which needs to be followed by the corporation. The “management” as well as “control” is considered to have been executed when the directors fulfil the performance of company’s affairs or business notwithstanding of where the company may be incorporated.

The present report is based on understanding the circumstances when a corporation will be held as a Malaysian resident company for tax purpose. The study will further specify the necessary requirements that needs to be fulfilled to be treated as a Malaysian company for tax purpose. Furthermore, the study will provide about the tax benefits that a company would get on becoming a Malaysian resident company.

Circumstance when a company is considered a tax resident for Malaysian income tax purpose:

In Malaysia “Body of person” implies unincorporated body of person and not a company. It also includes “co-operative society”, a trust, an “association” and a “Hindu Joint Family” but not including a partnership. In Malaysia entities might also be referred as “non-resident” which implies apart from an inhabitant in Malaysia with respect to “section 8” and based on “subsection 61 (3) of ITA 1967” (Palil et al. 2021). It includes the Hindu Joint Family which implies that under any system of law prevalent in India is regarded as “Hindu Joint Family” or co-parcenary.

The companies and the bodies of person should satisfy some of the important principles to be treated as resident in Malaysia. Under “section 8 of ITA 1967” it lays down the circumstances for determining the residence status of a person in regard to corporations and “bodies of person” excluding trust bodies where “subsection 61 (3) of ITA 1967” explains the circumstances regarding the residence position of a trust body.

With regard to “paragraph 8 (1) of the ITA 1967”, a “Joint Hindu Family” is considered as an occupant in Malaysia for the “basis year” during the assessment year given that the manager is regarded as dweller during that “basis year” (Mansur 2020). Furthermore, if the manager is considered as non-resident, the “Hindu Joint Family” is deemed as the non-resident of Malaysia. In respect of corporations or “bodies of person” that is conducting business is regarded as Malaysian resident under paragraph 8 (1)(b) of ITA 1967 for the basis year for assessment purpose given that during any point of the “basis year” the management along with its “control of business” or any single business activities are exercised in Malaysia.

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