FINANCE ACT 1997

Finance LAWS OF MALAYSIA REPRINT Act 557 FINANCE ACT 1997 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 1997 Date of Royal Assent ... ... ... … … Date of publication in the Gazette … … 6 February 1997 6 March 1997 PREVIOUS REPRINT First Reprint ... ... ... ... ... 2002 3 LAWS OF MALAYSIA Act 557 FINANCE ACT 1997 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 2 5. Amendment of section 4A 6. Amendment of section 13 7. Amendment of section 15A 8. Amendment of section 34 9. Amendment of section 39 10. Amendment of section 44 11. Amendment of section 46 12. Amendment of section 49 13. Amendment of section 60G 14. New section 60H 15. Amendment of section 83 4 Laws of Malaysia ACT 557 Section 16. Amendment of section 103 17. Amendment of section 107A 18. Amendment of section 109 19. Amendment of section 109B 20. Amendment of section 136 21. Amendment of Schedule 1 22. Amendment of Schedule 3 23. Amendment of Schedule 6 24. Amendment of Schedule 7A CHAPTER III AMENDMENTS TO THE PETROLEUM (INCOME TAX) ACT 1967 25. Commencement of amendments to the Petroleum (Income Tax) Act 1967 26. Amendment of section 2 27. Amendment of section 16 28. Amendment of section 22 29. Amendment of section 69 30. Amendment of section 70 31. Amendment of section 71 CHAPTER IV AMENDMENTS TO THE REAL PROPERTY GAINS TAX ACT 1976 32. Commencement of amendments to the Real Property Gains Tax Act 1976 33. Amendment of section 2 34. Amendment of section 45 35. Amendment of section 46 36. Amendment of section 47 37. Amendment of section 54 38. Amendment of Schedule 2 Finance 5 CHAPTER V AMENDMENT TO THE LABUAN OFFSHORE BUSINESS ACTIVITY TAX ACT 1990 Section 39. Commencement of amendment to the Labuan Offshore Business Activity Tax Act 1990 40. Amendment of section 2 CHAPTER VI AMENDMENTS TO THE SERVICE TAX ACT 1975 41. Commencement of amendments to the Service Tax Act 1975 42. Amendment of section 2 43. Amendment of section 3 44. Amendment of section 14 CHAPTER VII AMENDMENT TO THE SALES TAX ACT 1972 45. Commencement of amendment to the Sales Tax Act 1972 46. New section 2 B CHAPTERVIII AMENDMENT TO THE CUSTOMS ACT 1967 47. Commencement of amendment to the Customs Act 1967 48. Amendment of section 65 CHAPTER IX AMENDMENTS TO THE FREE ZONES ACT 1990 49. Commencement of amendments to the Free Zones Act 1990 50. Amendment of section 2 51. Amendment of section 5 52. New section 6 A 53. Amendment of section 8 54. Amendment of section 9 6 Laws of Malaysia ACT 557 Section 55. Amendment of section 10 56. Amendment of section 11 57. Amendment of section 12 58. Amendment of section 13 59. Amendment of section 30 CHAPTER X REPEAL OF THE CINEMATOGRAPH FILM-HIRE DUTY ACT 1965 60. Commencement of the repeal of the Cinematograph Film-Hire Duty Act 1965 61. Repeal Finance 7 LAWS OF MALAYSIA Act 557 FINANCE ACT 1997 An Act to amend the Income Tax Act 1967, the Petroleum (Income Tax) Act 1967, the Real Property Gains Tax Act 1976, the Labuan Offshore Business Activity Tax Act 1990, the Service Tax Act 1975, the Sales Tax Act 1972, the Customs Act 1967 and the Free Zones Act 1990, and to repeal the Cinematograph Film-Hire Duty Act 1965. [ ] 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: C HAPTER I PRELIMINARY Short title 1. This Act may be cited as the Finance Act 1997. Amendments and repeal 2. (1) The Income Tax Act 1967 [Act 53], the Petroleum (Income Tax) Act 1967 [Act 543], the Real Property Gains Tax Act 1976 [Act 169], the Labuan Offshore Business Activity Tax Act 1990 [Act 445], the Service Tax Act 1975 [Act 151], the Sales Tax Act 1972 [Act 64], the Customs Act 1967 [Act 235] and the Free Zones Act 1990 [Act 438] are amended in the manner specified in Chapters II, III, IV, V, VI, VII, VIII and IX respectively. (2) The Cinematograph Film-Hire Duty Act 1965 [Act 434] is repealed in the manner specified in Chapter X. 8 Laws of Malaysia ACT 557 CHAPTER II AMENDMENTS TO THE INCOME TAX ACT 1967 Commencement of amendments to the Income Tax Act 1967 3. (1) Except for paragraphs 4(a), 4(b), 19(a) and 19(b) and sections 5, 7, 15, 16, 17, 18, 20 and 21, this Chapter shall have effect for the year of assessment 1997 and subsequent years of assessment. (2) Paragraphs 4(a) and 19(b) and sections 16, 17 and 18 shall be deemed to have come into force on 25 October 1996. (3) Paragraphs 4(b) and 19(a) and sections 5, 7, 15 and 21 shall come into force on 1 January 1997. (4) Section 20 shall be deemed to have come into force on 2 August 1996. Amendment of section 2 4. The Income Tax Act 1967 [Act 53], which in this Chapter is referred to as the “principal Act”, is amended in subsection 2(1)— (a) in the definition of “approved loan” by inserting after the words “a person” in paragraph (b) the words “pursuant to an application received prior to 25 October 1996”; and (b) in the definition of “royalty” by substituting for subparagraph (a)(i) the following subparagraph: “(i) copyrights, artistic or scientific works, patents, designs or models, plans, secret processes or formulae, trademarks, or tapes for radio or television broadcasting, motion picture films, films or video tapes or other means of reproduction where such films or tapes have been or are to be used or reproduced in Malaysia or other like property or rights;”. Finance 9 Amendment of section 4A 5. Paragraph 4A(iii) of the principal Act is amended by deleting the words “, not being payments of film rentals, where the duty is leviable under the Cinematograph Film-Hire Duty Act 1965,”. Amendment of section 13 6. Subparagraph 13(1)(b)(i) of the principal Act is amended by inserting after the words “dental treatment” the words “or a benefit for child care”. Amendment of section 15A 7. Paragraph 15 A(c) of the principal Act is amended by deleting the words “, not being payments of film rentals, where the duty is leviable under the Cinematograph Film-Hire Duty Act 1965,”. Amendment of section 34 8. Subsection 34(6) of the principal Act is amended— (a) in paragraph (f) by deleting the word “and” at the end of the paragraph; (b) in paragraph (g) by substituting for the full stop at the end of the paragraph a semicolon; and (c) by inserting after paragraph (g) the following paragraphs: “(h) an amount equal to the expenditure incurred by the relevant person in the relevant period on the provision of services, public amenities and contributions to a charity or community project pertaining to education, health, housing and infrastructure, approved by the relevant authority: Provided that where a deduction has been made under this paragraph, no further deduction of the same amount shall be allowed under subsection 44(6); 10 Laws of Malaysia ACT 557 (i) an amount equal to the expenditure incurred, not being capital expenditure on land, premises, buildings, structures or works of a permanent nature or on alterations, additions or extensions thereof or in the acquisition of any rights in or over any property, by the relevant person in the relevant period on the provision and maintenance of a child care centre for the benefit of persons employed by him in his business; and (j) an amount equal to the expenditure incurred by the relevant person in the relevant period in establishing and managing a musical or cultural group approved by the Minister.”. Amendment of section 39 9. Subsection 39(1) of the principal Act is amended— (a) in paragraph (f) by substituting for the semicolon at the end of the paragraph a colon and inserting thereafter the following proviso: “Provided that this paragraph shall not apply if the payer has paid the amount referred to in subsection (2) of that section.”; (b) in paragraph (i) by substituting for the semicolon at the end of the paragraph a colon and inserting thereafter the following proviso: “Provided that this paragraph shall not apply if the payer has paid the amount referred to in subsection (2) of that section.”; and (c) in paragraph (j) by substituting for the semicolon at the end of the paragraph a colon and inserting thereafter the following proviso: “Provided that this paragraph shall not apply if the payer has paid the amount referred to in subsection (2) of that section.”. Finance 11 Amendment of section 44 10. Section 44 of the principal Act is amended— (a) in paragraph (1)(c) by inserting after the words “(6)” the words “or (6A)”; (b) by inserting after subsection (6) the following subsection: “(6 A ) There shall be deducted pursuant to this subsection from the aggregate income of a person for the relevant year reduced by any deduction falling to be made for that year pursuant to subsection (2) or Schedule 4, 4 A or 4B, an amount equal to the value, as determined by the Department of Museum and Antiquities or the National Archives of any gift of artefact or manuscript made by him in the basis year for that year to the Government or State Government.”; and (c) in subsection (7) in the definition of “institution” by substituting for paragraph (f) the following paragraph: “(f) a technical or vocational training institution;”. Amendment of section 46 11. Section 46 of the principal Act is amended— (a) by renumbering the existing section 46 as subsection 46(1); (b) in paragraph (e) by deleting the word “and” at the end of the paragraph; (c) in paragraph (f) by substituting for the full stop at the end of the paragraph the words “; and”; (d) by inserting after paragraph (f) the following paragraph: “(g) an amount limited to a maximum of five thousand ringgit in respect of medical expenses expended in that basis year by that individual on himself if he is suffering from a serious disease or on his wife or child who is suffering from a serious disease, or in the case of a wife, on herself if she 12 Laws of Malaysia ACT 557 is suffering from a serious disease or on her husband or child who is suffering from a serious disease: Provided that the claim is evidenced by a receipt and certification issued by a medical practitioner that treatment was provided to the individual, spouse or child for that disease: Provided further that where the wife has no total income the total deduction under this paragraph shall not exceed five thousand ringgit.”; and (e) by inserting after subsection (1) the following subsection: “(2) In paragraph (1)(g)— “child” shall be construed as referring to a child as defined in subsection 48(9); “serious disease” includes acquired immunity deficiency syndrome, Parkinson’s disease, cancer, renal failure, leukaemia and other similar diseases.”. Amendment of section 49 12. Section 49 of the principal Act is amended by substituting for subsection (2) the following subsection: “(2) For the purposes of subsection (1), no regard shall be had to any contribution to an approved scheme unless the contribution was obligatory by reason of— (a) any contract of employment of the individual claiming a deduction in respect of the contribution; or (b) any provision in the rules, regulations, by-laws or constitution of the scheme, and, where the contribution was partly obligatory by reason of such a contract or provision and partly not so obligatory, regard shall be had only to the part which was so obligatory.”. Finance 13 Amendment of section 60G 13. Subsection 60 G (6) of the principal Act is amended by substituting for the definition of “foreign fund man