Tax residence status determines how you’re taxed in Malaysia, whether you’re considered a “tax resident” or “non-resident”. It’s not based on your citizenship, but on how long you physically stay in Malaysia within a calendar year. Your tax rates, benefits, and reliefs all depend on this status.
Section 7(1)
You are considered a tax resident if you meet any of the following conditions under the Income Tax Act 1967, specifically under Section 7(1) 183-Day Rule. You are physically present in Malaysia for at least 183 days in a calendar year from January 1 to December 31. The days don’t need to be consecutive. Public holidays, weekends, and sick leave count as part of the 183 days, as long as they’re connected to workdays.
Section 7(1)(b)
Under Income Tax Act 1967 Section 7(1)(b) is known as less than 183 Days but linked to previous/next year. If your stay is less than 183 days, but it is linked to a stay of 183 days in the year before or after, you can still qualify as a tax resident.
Provided that any temporary absence from Malaysia is :
- connected with his service in Malaysia and owing to service matters or attending conferences or seminars or study abroad
- owing to ill-health involving himself or a member of his immediate family; and
- 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.
Section 7(1)(c)
Under Income Tax Act 1967 Section 7(1)(c) is known as 90 Days or More + 3 Out of 4 Years Rule. You stayed in Malaysia for at least 90 days in the current year, and you were a tax resident in any 3 out of the 4 previous years.
Section 7(1)(d)
Under Income Tax Act 1967 Section 7(1)(d) is Malaysia is Your Permanent Home. If none of the above apply, you may still be considered a tax resident if Malaysia is your permanent home and the government accepts that you live here long-term.
To know more, refer here.