Foreign Worker with Non-Resident Status
Income Tax Act 1967 stated about a foreign worker or person entitled to have tax resident status in Malaysia under section 7. Several clauses highlight the requirement for a foreigner to be entitled as a resident. Other than tax residential status for a foreign worker, the section also mentions the Malaysian citizen who works outside Malaysia. As for this individual assignment, you need to portray a situation of a foreign worker who having non-resident status and resident status in Malaysia for 5 years. The situation must have at least the following criteria:
- Non-resident period
- Need to have a situation from all subsections under section 7 Income Tax Act 1967. 3
On top of that, you need to produce a situation that portrays a Malaysian citizen who initially a tax resident in Malaysia which later become a non-tax resident in Malaysia.
The situation must be subjected to Section 7 (1B). The situation must consist of a minimum of 3 years period. Your work will be assessed based on clarification, the fulfillment of the requirement, and logical reasoning.
Situation 1: Foreign Worker with Non-Resident and Resident Status
John is a foreign worker who has been working in Malaysia for 7 years. In his first 2 years, he was a non-resident and paid taxes only on his Malaysian-sourced income. He did not meet the conditions to be a tax resident, as he did not stay in Malaysia for more than 182 days in a calendar year. After 2 years, he was offered a permanent job in Malaysia and decided to move with his family. He became a tax resident in Malaysia from the third year onwards, and his income tax was calculated based on the resident tax rate.
In the fifth year of his residency, John received a job offer in his home country, which he accepted. He resigned from his Malaysian job and moved back to his home country, making him a non-resident again. He only received income from Malaysia for the first four years, and his income tax was based on the resident tax rate. In his fifth year, he only received income from his home country and was no longer eligible for tax resident status in Malaysia.
Situation 2: Malaysian Citizen with Tax Resident and Non-Tax Resident Status
Ahmad is a Malaysian citizen who worked in Malaysia for 5 years before getting a job offer in the United States. He moved to the United States with his family and worked there for the next 3 years. During this period, he met the conditions to be a tax resident in the United States and paid taxes there.
In his fourth year in the United States, Ahmad decided to move back to Malaysia with his family. He quit his job in the United States and came back to Malaysia, where he found a new job.
