When preparing corporate income tax, it is important to determine the status of the company whether it is resident or non-resident because the rate of the corporate income tax will be different.
s.8(1)(b) of the Income Tax Act refers to a resident status of a company. A company is said to be a resident if the control and management of its business are exercised in Malaysia. Control and management does not necessarily equate to the country in which the business is being carried out. This means that the physical operation or having trading activities may not necessarily equate to the place of control and management.
With reference to Public Ruling 5/2011, management and control is the key factor to ascertain the residence status of a company in Malaysia. The management and control refers to three criterias:-
- First, controlling authority which determines the policies to be followed by the company.
- Second, considered to be exercised where the directors meet to conduct the company’s business / affairs irrespective of where the company might be incorporated.
- Third, how the business is managed.