FINANCE ACT 1991

Finance LAWS OF MALAYSIA REPRINT Act 451 FINANCE ACT 1991 Incorporating all amendments up to 1 January 2006 PUBLISHED BY THE COMMISSIONER OF LAW REVISION, MALAYSIA UNDER THE AUTHORITY OF THE REVISION OF LAWS ACT 1968 IN COLLABORATION WITH PERCETAKAN NASIONAL MALAYSIA BHD 2006 1 2 FINANCE ACT 1991 Date of Royal Assent ... ... ... … … 28 March 1991 Date of publication in the Gazette … … 11 April 1991 PREVIOUS REPRINT First Reprint ... ... ... ... ... 2001 3 LAWS OF MALAYSIA Act 451 FINANCE ACT 1991 ARRANGEMENT OF SECTIONS CHAPTER I PRELIMINARY Section 1. Short title 2. Amendments of Acts CHAPTER II AMENDMENTS TO THE INCOME TAX ACT 1967 3. Commencement of amendments to the Income Tax Act 1967 4. Deletion of section 3A 5. Amendment of section 6 6. Amendment of section 6A 7. Amendment of section 19 8. New section 34B 9. Amendment of section 39 10. Amendment of section 43 11. Amendment of section 44 12. Amendment of section 45 13. Amendment of section 46 14. Amendment of section 47 15. Amendment of section 48 4 Laws of Malaysia ACT 451 Section 16. Amendment of section 49 17. Amendment of section 50 18. Amendment of section 65A 19. Amendment of section 78 20. Amendment of section 82 21. Amendment of section 109C 22. Amendment of section 130 23. Amendment of section 153 24. Amendment of Schedule 1 25. Amendment of Schedule 3 26. New Schedule 4B 27. Amendment of Schedule 5 28. Amendment of Schedule 6 29. Amendment of Schedule 7A CHAPTER III AMENDMENTS TO THE SUPPLEMENTARY INCOME TAX ACT 1967 30. Commencement of amendments to the Supplementary Income Tax Act 1967 31. Amendment of section 13 32. Amendment of section 15 33. Amendment of section 16 CHAPTER IV AMENDMENTS TO THE PETROLEUM (INCOME TAX) ACT 1967 34. Commencement of amendments to the Petroleum (Income Tax) Act 1967 35. Amendment of section 18 36. Amendment of Schedule 2 Finance CHAPTER V AMENDMENTS TO THE CUSTOMS ACT 1967 Section 37. Commencement of amendments to the Customs Act 1967 38. Amendment of section 155 39. Amendment of section 158 40. Amendment of section 160 CHAPTER VI AMENDMENTS TO THE SALES TAX ACT 1972 41. Commencement of amendments to the Sales Tax Act 1972 42. Amendment of section 2 43. Amendment of section 19 44. Amendment of section 71 45. Amendment of section 73 46. Amendment of section 77 47. Amendment of section 79 CHAPTER VII AMENDMENTS TO THE SERVICE TAX ACT 1975 48. Commencement of amendments to the Service Tax Act 1975 49. Amendment of section 2 50. Amendment of section 12 CHAPTER VIII AMENDMENT TO THE EXCISE ACT 1976 51. Commencement of amendment to the Excise Act 1976 52. Amendment of section 88 5 6 Laws of Malaysia ACT 451 Finance 7 LAWS OF MALAYSIA Act 451 FINANCE ACT 1991 An Act to amend the Income Tax Act 1967, the Supplementary Income Tax Act 1967, the Petroleum (Income Tax) Act 1967, the Customs Act 1967, the Sales Tax Act 1972, the Service Tax Act 1975 and the Excise Act 1976. [ ] BE IT ENACTED by the Seri Paduka Baginda Yang di-Pertuan Agong with the advice and consent of the Dewan Negara and Dewan Rakyat in Parliament assembled, and by the authority of the same, as follows: CHAPTER I PRELIMINARY Short title 1. This Act may be cited as the Finance Act 1991. Amendments of Acts 2. The Income Tax Act 1967 [Act 53], the Supplementary Income Tax Act 1967 [Act 54], the Petroleum (Income Tax) Act 1967 [Act 543], the Customs Act 1967 [Act 235], the Sales Tax Act 1972 [Act 64], the Service Tax Act 1975 [Act 151] and the Excise Act 1976 [Act 176] are amended in the manner specified in Chapters II, III, IV, V, VI, VII and VIII respectively. 8 Laws of Malaysia ACT 451 CHAPTER II AMENDMENTS TO THE INCOME TAX ACT 1967 Commencement of amendments to the Income Tax Act 1967 3. (1) Except for sections 7, 8, 10, paragraphs 11(a), 11(b), section 19, paragraph 20(b), sections 21, 23, 26, 27, paragraphs 28(d) and (e), this Chapter shall have effect for the year of assessment 1991 and subsequent years of assessment. (2) Section 19, paragraph 20(b), sections 23 and 27 shall be deemed to have come into force on 14 December 1990. (3) Sections 7, 8, 10, paragraphs 11(a), 11(b) and section 26 shall have effect for the year of assessment 1992 and subsequent years of assessment. (4) Section 21, paragraphs 28(d) and (e) shall be deemed to have come into force on 1 October 1989. Deletion of section 3A 4. The Income Tax Act 1967 [Act 53], which in this Chapter is referred to as the “principal Act”, is amended by deleting section 3A. Amendment of section 6 5. Section 6 of the principal Act is amended by deleting paragraph (1)(c). Amendment of section 6A 6. Section 6A of the principal Act is amended by substituting for the colon immediately after the words “ten thousand ringgit” in paragraph (2)(a) a semicolon and deleting the proviso thereto. Amendment of section 19 7. Section 19 of the principal Act is amended by substituting for the words “Schedule 2, 3, 4 and 4A” in subsection (5) the words “Schedules 2, 3, 4, 4A and 4B”. Finance 9 New section 34B 8. The principal Act is amended by inserting, immediately after section 34A, the following new section 34B: “Special deduction for contribution to an approved research institute or payment for use of services of an approved research institute or company 34B. (1) Subject to this section, in ascertaining the adjusted income of a person from a business for this basis period for a year of assessment, a deduction shall be made, as specified in subsection (3), from the gross income from the business for that period in respect of expenditure, not being capital expenditure, incurred by that person during that period in respect of— (a) contribution in cash to an approved research institute; or (b) payment for the use of the services of an approved research institute or an approved research company. (2) The amount of deduction to be made under subsection (1) shall be twice the amount of expenditure, not being capital expenditure, referred to in that subsection. (3) Where any deduction in respect of expenditure referred to in subsection (1) is made under this section, no deduction in respect of that expenditure shall be made under section 33, 34 or 34A. (4) In this section— (a) an “approved research institute” means an institute, including a company licensed under section 24 of the Companies Act 1965 [Act 125], approved by the Minister to wholly carry on research in an industry specified in the approval and to commercially exploit the benefit of such research thereof; (b) an “approved research company” means a company, other than a company licensed under section 24 of the Companies Act 1965, approved by the Minister to wholly carry on research in an industry specified in the approval and to commercially exploit the benefit of such research thereof.”. 10 Laws of Malaysia ACT 451 Amendment of section 39 9. Section 39 of the principal Act is amended by substituting for the word “twenty-five” wherever it appears in paragraph (1)(k) the word “fifty”. Amendment of section 43 10. Section 43 of the principal Act is amended by substituting for the words “or 4A” in paragraph (1)(c) the words “, 4A or 4B”. Amendment of section 44 11. Section 44 of the principal Act is amended— (a) by substituting for the words “or 4A” in paragraph (1)(b) the words “, 4A or 4B”; (b) by substituting for the words “subsection (2), Schedule 4 or Schedule 4A” in subsection (6) the words “subsection (2) or Schedule 4, 4A or 4B”; and (c) by substituting for the colon immediately after the word “concerned” in subsection (6) a full stop and deleting the proviso thereto. Amendment of section 45 12. Section 45 of the principal Act is amended— (a) by substituting for subsection (2) the following: “(2) Where an individual and a wife of his were living together in the basis year for a year of assessment and did not in that basis year cease to live together or to be husband and wife of each other, then the wife may elect in writing before the first day of April in the year of assessment or any subsequent date (as may be permitted by the Director General) in the year of Finance 11 assessment that her total income shall be aggregated with the total income (if any) of her husband and assessed in his name for that year of assessment: Provided that where a wife is not resident for the basis year for a year of assessment, she may elect under this subsection only if she is a citizen.”; and (b) by deleting subsections (4), (5) and (6). Amendment of section 46 13. Section 46 of the principal Act is amended— (a) by deleting the word “and” at the end of paragraph (a); (b) by substituting for the full stop at the end of paragraph (b) a semicolon and inserting, immediately thereafter, the word “and”; and (c) by inserting, immediately after paragraph (b), the following new paragraph (c): “(c) an amount limited to a maximum of one thousand ringgit in respect of medical expenses expended in that basis year by that individual for his parents: Provided that the claim is evidenced by a receipt by a medical practitioner certifying that treatment was provided to the parents.”. Amendment of section 47 14. Section 47 of the principal Act is amended— (a) by substituting for the word “two” wherever it appears in subsections (1) and (3) the word “three”; (b) by substituting for the words “the income from her employment, pension or profession” in subsection (4) the words “her income”; and 12 Laws of Malaysia ACT 451 (c) by inserting, immediately after subsection (4), the following new subsection (5): “(5) Notwithstanding subsection 45(2) but subject to subsection (4), where an individual’s wife has no total income which can be aggregated with that of her husband for a year of assessment, an allowance or deduction shall be made to him in respect of that wife under subsection (1).”. Amendment of section 48 15. Section 48 of the principal Act is amended— (a) by substituting for the words “the income from her employment, pension or profession under subsection 45(4)” in the proviso to subsection (1) the words “her income”; (b) by substituting for paragraph (2)(a) the following: “(a) in respect of children falling under paragraphs (1) (a) to (c), for the first five children in order of age, eight hundred ringgit for each child;”; and (c) by substituting for the words “four hundred” in paragraph (2)(b) the words “one thousand”. Amendment of section 49 16. Section 49 of the principal Act is amended by substituting for the proviso to subsection (1) the following: “Provided that where subsection 45(2) and paragraph 50(3)(b) or (c) apply, there shall be allowed for that year of assessment a further deduction of the aggregate amount of the payments or contributions or both made by the wife or a deduction of three thousand five hundred ringgit, whichever is the less.”. Amendment of section 50 17. Section 50 of the principal Act is amended— (a) by substituting for the words “Subject to subsection (4), in” in subsection (3) the word “In”; Finance 13 (b) by inserting, immediately before the words “any premium” in paragraph (3)(b), the words “where subsection 45(2) applies to the husband and the wife for the year of assessment to which the relevant year relates,”; and (c) by deleting subsection (4). Amendment of section 65A 18. Section 65A of the principal Act is amended— (a) by renumbering subsection 65A(1) as section 65A; and (b) by deleting subsection (2). Amendment of section 78 19. Section 78 of the principal Act is amended— (a) by inserting, immediately after the words “chargeable to tax”, the words “or for determining his liability”; (b) by deleting the word “or” at the end of paragraph (b); (c) by substituting for the full stop at the end of paragraph (c) a semicolon and inserting, immediately thereafter, the word “or”; and (d) by inserting, immediately after paragraph