FINANCE ACT 1993

Finance LAWS OF MALAYSIA REPRINT Act 497 FINANCE ACT 1993 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 1993 Date of Royal Assent ... ... ... … … 22 January 1993 Date of publication in the Gazette … … 4 February 1993 PREVIOUS REPRINT First Reprint ... ... ... ... ... 2002 3 LAWS OF MALAYSIA Act 497 FINANCE ACT 1993 ARRANGEMENT OF SECTIONS CHAPTER I PRELIMINARY Section 1. Short title 2. Amendments and repeal CHAPTER II AMENDMENTS TO THE INCOME TAX ACT 1967 3. Commencement of amendments to the Income Tax Act 1967 4. Amendment of section 34 5. New section 60F 6. Amendment of section 108 7. Amendment of section 109 8. Amendment of section 110 9. Amendment of Schedule 1 10. Amendment of Schedule 6 CHAPTER III AMENDMENTS TO THE STAMP ACT 1949 11. Commencement of amendments to the Stamp Act 1949 12. Amendment of section 9 13. Substitution of section 12A 14. Amendment of First Schedule 4 Laws of Malaysia A CT 497 CHAPTER IV AMENDMENTS TO THE FINANCE ACT 1991 Section 15. Amendment of section 3 CHAPTER V REPEAL AND SAVING OF THE SUPPLEMENTARY INCOME TAX ACT 1967 16. Repeal and saving of the Supplementary Income Tax Act 1967 Finance 5 LAWS OF MALAYSIA Act 497 FINANCE ACT 1993 An Act to amend the Income Tax Act 1967, the Stamp Act 1949 and the Finance Act 1991, and to repeal the Supplementary Income Tax Act 1967. [ ] 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 1993. Amendments and repeal 2. (1) The Income Tax Act 1967 [Act 53], the Stamp Act 1949 [Act 378] and the Finance Act 1991 [Act 451] are amended in the manner specified in Chapters II, III and IV respectively. (2) The Supplementary Income Tax Act 1967 [Act 54] is repealed in the manner specified in Chapter V. 6 Laws of Malaysia A CT 497 CHAPTER II AMENDMENTS TO THE INCOME TAX ACT 1967 Commencement of amendments to the Income Tax Act 1967 3. (1) Except for section 4, paragraph 6(b) and section 7, this Chapter shall have effect for the year of assessment 1993 and subsequent years of assessment. (2) Section 4 shall have effect for the year of assessment 1994 and subsequent years of assessment. (3) Paragraph 6(b) shall be deemed to have come into force for the year of assessment 1989. (4) Section 7 shall be deemed to have come into force on 30 October 1992. Amendment of section 34 4. Section 34 of the Income Tax Act 1967, which is referred to as the “principal Act” in this Chapter, is amended, in subsection (6)— (a) by deleting the word “and” at the end of paragraph (d); (b) by substituting for the full stop at the end of paragraph (e) the punctuation mark and word “; and”; and (c) by inserting, after paragraph (e), the following paragraph: “(f) an amount equal to the expenditure incurred by the relevant person in the relevant period in respect of translation into or publication in the national language of cultural, literary, professional, scientific or technical books approved by the Dewan Bahasa dan Pustaka.”. Finance 7 New section 60 F 5. The principal Act is amended by inserting, after section 60E, the following section: “Investment holding company 60F . (1) Where an investment holding company is resident for the basis year for a year of assessment there shall be deducted in arriving at the total income before any deduction falling to be made under paragraph 44(1)(c) an amount in respect of expenses incurred by that company in the basis period for that year of assessment, which amount shall be determined in accordance with the formula— A x B 4C where A is the total of the permitted expenses incurred for that basis period reduced by any receipt of a similar kind; B is the gross income consisting of dividend, interest and rent chargeable to tax for that basis period; and C is the aggregate of the gross income consisting of dividend (whether exempt or not), interest and rent, and gains made from the realization of investments for that basis period: Provided that— (a) the amount of deduction to be made shall not exceed five per cent of the gross income consisting of dividend, interest and rent for that basis period; and (b) where, by reason of an absence or insufficiency of aggregate income for that year of assessment, effect cannot be given or cannot be given in full to any deduction falling to be made to the investment holding company under this section for that year, that deduction which has not been so made shall not be made to the investment holding company for any subsequent year of assessment. 8 Laws of Malaysia A CT 497 (2) In this section— “investment holding company” means a company whose activities consist wholly in the making of investments and whose income is derived therefrom; “permitted expenses” means expenses incurred by an investment holding company in respect of— (a) directors’ fees; (b) wages, salaries and allowances; (c) management fees; (d) secretarial, audit and accounting fees, telephone charges, printing and stationery costs and postage; and (e) rent and other expenses incidental to the maintenance of an office, which are not deductible under subsection 33(1).”. Amendment of section 108 6. Section 108 of the principal Act is amended— (a) by inserting, after subsection (2A), the following subsection: “(2 B) Notwithstanding any other provision of this Act, where a dividend is paid, credited or distributed with or without deduction of tax during the basis year for the year of assessment 1993, the amount of the dividend received by the shareholder shall be deemed to be a dividend of such a gross amount as after deduction of tax at the rate of thirty-four per cent would be equal to— (a) the amount in fact paid or credited; or (b) where the dividend consists of property other than money, the amount of the market value of that property at the time of the dividend’s distribution, and a sum equal to the difference between that gross amount and the amount mentioned in paragraph (a) or (b), as the case may be, shall be deemed to have been deducted from the dividend as tax.”; Finance 9 (b) by substituting for subsection (4A) the following subsection: “(4 A) In any case where tax has been deducted or deemed to have been deducted at the rate of forty per cent on any dividend paid, credited or distributed during the basis year for the year of assessment 1989 to which subsection (2 A) applies, the compared total shall be determined at the rate of thirty-five per cent.”; and (c) by inserting, after subsection (4 A ), the following subsection: “(4 B ) In any case where tax has been deducted or deemed to have been deducted at the rate of thirty-five per cent on any dividend paid, credited or distributed during the basis year for the year of assessment 1993 to which subsection (2B) applies, the compared total shall be determined at the rate of thirty-four per cent.”. Amendment of section 109 7. Section 109 of the principal Act is amended by inserting, after the figures “33” in subsection (1), the word and figures “or 35”. Amendment of section 110 8. Section 110 of the principal Act is amended by inserting, after subsection (1 A), the following subsection: “(1B) Notwithstanding subsection (1), where tax on any dividend paid, credited or distributed during the basis year for the year of assessment 1993 has been deducted at the rate of thirty-five per cent, the tax to be set off under subsection (1) shall be the sum deemed to be the tax deducted from such dividend under subsection 108(2B ).”. 10 Laws of Malaysia A CT 497 Amendment of Schedule 1 9. Schedule 1 to the principal Act is amended— (a) by substituting for the rates in paragraph 1 of Part I the following rates: “Chargeable Income Rate of Income Tax For every ringgit of the first RM 2,500 2 per cent For every ringgit of the next RM 2,500 5 per cent For every ringgit of the next RM5,000 8 per cent For every ringgit of the next RM10,000 10 per cent For every ringgit of the next RM15,000 15 per cent For every ringgit of the next RM15,000 21 per cent For every ringgit of the next RM20,000 26 per cent For every ringgit of the next RM30,000 31 per cent For every ringgit exceeding RM100,000 34 per cent”; (b) by substituting for the figures “35” in paragraph 2 of Part I the figures “34”; (c) by substituting for the rates in Part IV the following rates: “Chargeable Income Rate of Income Tax For every ringgit of the first RM10,000 2 per cent For every ringgit of the next RM10,000 4 per cent For every ringgit of the next RM10,000 7 per cent For every ringgit of the next RM10,000 10 per cent For every ringgit of the next RM10,000 13 per cent For every ringgit of the next RM25,000 17 per cent For every ringgit of the next RM25,000 22 per cent For every ringgit of the next RM50,000 26 per cent For every ringgit of the next RM100,000 29 per cent For every ringgit of the next RM250,000 32 per cent For every ringgit exceeding RM500,000 34 per cent”. Finance 11 Amendment of Schedule 6 10. Schedule 6 to the principal Act is amended— (a) in paragraph 25A, by inserting, after the word “gratuity”, the words “or by way of payment in lieu of leave”; (b) in paragraph 35— (i) by substituting for the full stop at the end of subparagraph (b) the punctuation mark and word “; or”; and (ii) by inserting, after subparagraph (b), the following subparagraph: “(c) in respect of bonds, other than convertible loan stock, issued by a company rated by Rating Agency Malaysia Berhad.”. CHAPTER III AMENDMENTS TO THE STAMP ACT 1949 Commencement of amendments to the Stamp Act 1949 11. This Chapter shall come into force on 1 January 1993. Amendment of section 9 12. (1) Section 9 of the Stamp Act 1949, which is referred to as the “principal Act” in this Chapter, is amended, in subsection (1), by substituting for paragraph (c) the following paragraph: “(c) that the said banker, stockbroker or insurer do pay on 1 January and 1 July in each year to the Collector the amount due and collected thereon as duties on such unstamped cheques, contract notes or policies of insurance, and where he fails to pay the amount due on each date specified or within eight days immediately thereafter, he shall in addition to the amount due pay a further amount of five hundred ringgit or ten per centum of the amount due whichever is the greater and any amount due shall be recoverable as a debt due to the Government;”. 12 Laws of Malaysia A CT 497 (2) A banker, stockbroker or insurer authorized under subsection 9(1) of the principal Act before 1 January 1993 shall as from that date be subject to the conditions in that subsection as amended by subsection (1) of this section. Substitution of section 12 A 13. The principal Act is amended by substituting for section 12 A the following section: “Assessment of the value of property under transfer or settlement 12 A. Where an instrument is chargeable with duty under subitem 32(a) of the First Schedule, the date for determining the market value of any property being transferred, settled or gifted shall be— (a) in the case of a settlement or gift, the date of execution of the instrument of trust or settlement or gift; (b) in the case of a transfer implementing a sale under a duly stamped agreement of sale and purchase, the date of execution of that agreement; (c) in the case of a transfer of any property granted by a statutory body, a local authority or any cooperative society registered under any laws relating to cooperative societies, the date when the final terms of transfer had been communicated to the transferee, and in the case o