FINANCE ACT 1998

Finance LAWS OF MALAYSIA REPRINT Act 578 FINANCE ACT 1998 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 1998 Date of Royal Assent ... ... ... … … 4 March 1998 Date of publication in the Gazette … … 19 March 1998 PREVIOUS REPRINT First Reprint ... ... ... ... ... 2002 3 LAWS OF MALAYSIA Act 578 FINANCE ACT 1998 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 3C 5. Amendment of section 6A 6. New section 6c 7. Amendment of section 25 8. Amendment of section 27 9. Amendment of section 34 10. Amendment of section 39 11. Amendment of section 44 12. Amendment of section 48 13. Amendment of section 60 14. Amendment of section 60E 15. Amendment of section 91 16. Amendment of section 108 17. Amendment of section 110 4 Laws of Malaysia ACT 578 Section 18. Amendment of section 120 19. Amendment of Schedule 1 20. Amendment of Schedule 3 21. Amendment of Schedule 7A CHAPTER III AMENDMENTS TO THE PETROLEUM (INCOME TAX) ACT 1967 22. Commencement of amendments to the Petroleum (Income Tax) Act 1967 23. Amendment of section 16 24. Amendment of section 18 25. Amendment of section 22 26. Amendment of section 23 27. Amendment of section 39 28. Amendment of section 50 CHAPTER IV AMENDMENTS TO THE REAL PROPERTY GAINS TAX ACT 1976 29. Commencement of amendments to the Real Property Gains Tax Act 1976 30. Amendment of section 15 31. Amendment of Schedule 2 32. Amendment of Schedule 5 CHAPTER V AMENDMENT TO THE STAMP ACT 1949 33. Commencement of amendment to the Stamp Act 1949 34. Amendment of section 55 CHAPTER VI AMENDMENT TO THE SALES TAX ACT 1972 35. Commencement of amendment to the Sales Tax Act 1972 36. Amendment of section 14 Finance CHAPTER VII AMENDMENTS TO THE CUSTOMS ACT 1967 Section 37. Commencement of amendments to the Customs Act 1967 38. Amendment of section 2 39. Amendment of section 21 40. Amendment of section 24 41. Amendment of section 29 42. Amendment of section 35 43. Amendment of section 66 44. Amendment of section 80 45. New section 87A 46. New section 91A 47. New section 100A 48. Amendment of section 115 49. New section 125A 50. Amendment of section 133 51. Amendment of section 142 52. New section 143A CHAPTER VIII AMENDMENTS TO THE FREE ZONES ACT 1990 53. Commencement of amendments to the Free Zones Act 1990 54. Amendment of section 2 55. Amendment of section 27 5 6 Laws of Malaysia ACT 578 Finance 7 LAWS OF MALAYSIA Act 578 FINANCE ACT 1998 An Act to amend the Income Tax Act 1967, the Petroleum (Income Tax) Act 1967, the Real Property Gains Tax Act 1976, the Stamp Act 1949, the Sales Tax Act 1972, the Customs Act 1967 and the Free Zones Act 1990. [ ] 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 1998. Amendments of Acts 2. 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 Stamp Act 1949 [Act 378], 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 and VIII respectively. 8 Laws of Malaysia ACT 578 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, 14, 15 and 18 and paragraphs 21(d) and 21(g), this Chapter shall have effect for the year of assessment 1998 and subsequent years of assessment. (2) Sections 7, 8, 14 and 15 and paragraph 21(g) shall come into force on 1 January 1999. (3) Section 10 shall be deemed to have come into force on 17 October 1997. (4) Section 18 shall have effect upon the coming into force of this Act. (5) Paragraph 21(d) shall have effect for the year of assessment 1999 and subsequent years of assessment. Deletion of section 3C 4. The Income Tax Act 1967, which in this Chapter is referred to as the “principal Act”, is amended by deleting section 3 C. Amendment of section 6 A 5. Section 6A of the principal Act is amended— (a) in subsection (1) by substituting for the words “and (3)” the words “, (3) and (3 A)”; (b) by inserting after subsection (3) the following subsection: “(3A) A rebate of four hundred ringgit shall be granted to an individual for a year of assessment in respect of the purchase, evidenced by a receipt, of a personal computer in the basis year for that year of assessment: Provided that no rebate under this subsection shall be granted to that individual— (a) for the four following years of assessment; Finance 9 (b) where the personal computer was used for the purposes of his business; or (c) where such rebate has been granted to the spouse.”; and (c) in subsection (4) by substituting for the words “and (3)” the words “, (3) and (3 A)”. New section 6 C 6. The principal Act is amended by inserting after section 6B the following section: “Tax rebate on fees 6C. Income tax charged for each year of assessment upon the chargeable income of an individual shall be rebated in respect of any fee paid to the Government in the basis year for that year of assessment pursuant to any order made under section 3 of the Fees Act 1951 [Act 209], for the issue of an Employment Pass, Visit Pass (Temporary Employment) or Work Pass before any set off is made under section 110 and any credit is allowed under section 132 or 133: Provided that where the rebate exceeds the income tax charged (before any such rebate) for any year of assessment, the excess shall not be paid to that individual and shall not be available as a credit to set off his tax liability for any subsequent year of assessment.”. Amendment of section 25 7. Section 25 of the principal Act is amended— (a) in subsection (3) by substituting for the word “eleven” wherever it appears the word “five”; (b) in subparagraph (4)(a)(i) by substituting for the word “nine” wherever it appears the word “five”; and (c) in paragraphs (4)(b) and (4)(c) and subsection (5) by substituting for the word “eleven” wherever it appears the word “five”. 10 Laws of Malaysia ACT 578 Amendment of section 27 8. Section 27 of the principal Act is amended— (a) in paragraphs (2)(b) and (2)(c) by substituting for the word “eleven” wherever it appears the word “five”; and (b) in subsection (3) by substituting for the word “eleven” wherever it appears the word “five”. Amendment of section 34 9. Section 34 of the principal Act is amended— (a) in paragraph (4)(a) by substituting for the word “seventeen” the word “nineteen”; (b) by deleting the word “and” at the end of paragraph (6)(i); (c) by substituting for the full stop at the end of paragraph (6)(j) the word “; and”; and (d) by inserting after paragraph (6)(j) the following paragraph: “(k) an amount equal to the expenditure incurred by the relevant person in the relevant period for sponsoring any arts or cultural activity approved by the Ministry of Culture, Arts and Tourism: Provided that the amount deducted shall not exceed two hundred thousand ringgit.”. Amendment of section 39 10. Subsection 39(1) of the principal Act is amended by inserting after paragraph (g) the following paragraph: “(h) any sum paid by way of a bonus to an employee in excess of two twelfths of his wages or salary;”. Finance 11 Amendment of section 44 11. Section 44 of the principal Act is amended— (a) by substituting for paragraph (1)(d) the following paragraph: “(d) thereafter, by any deduction falling to be so made pursuant to subsection (8), (9), (10) or (11).”; (b) in subsection (6A) by substituting for the words “or manuscript” the words “, manuscript or painting”; and (c) by inserting after subsection (8) the following subsections: “(9) There shall be deducted pursuant to this subsection from the aggregate income of a relevant person who is an individual for the relevant year reduced by any deduction for that year in accordance with subsection (1) an amount equal to any gift of money or contribution in kind (the value to be determined by the relevant local authority) made by him in the basis year for that year for the provision of facilities in public places for the benefit of disabled persons. (10) There shall be deducted pursuant to this subsection from the aggregate income of a relevant person who is an individual for the relevant year reduced by any deduction for that year in accordance with subsection (1) an amount equal to any gift of money or the cost or value (as certified by the Ministry of Health) of any gift of medical equipment made by him in the basis year for that year to any health care facility approved by that Ministry, and that amount shall not exceed twenty thousand ringgit. (11) There shall be deducted pursuant to this subsection from the aggregate income of a relevant person for the relevant year reduced by any deduction for that year in accordance with subsection (1) an amount equal to the value of any gift of painting (to be determined by the National Art Gallery or any state art gallery) made by him in the basis year for that year to the National Art Gallery or any state art gallery.”. 12 Laws of Malaysia ACT 578 Amendment of section 48 12. Section 48 of the principal Act is amended by substituting for paragraph (3)(a) the following paragraph: “(3)(a) in respect of a child over the age of eighteen years and is receiving instruction at any educational establishment mentioned therein or is serving under articles or indentures with a view to qualifying in a trade or profession (in this subsection referred to as receiving further education) but not including a child receiving instruction at any school, then, if that individual satisfies the Director General that he has directly expended in that basis year for that year of assessment a sum or sums exceeding the ordinary deduction on the maintenance of that child or in making any payment in connection with that child’s further education, there shall be allowed in substitution for the ordinary deduction, a deduction equal to the total sum or sums so expended but not exceeding— (i) four times the amount of the ordinary deduction if that child is receiving further education in Malaysia; (ii) four times the amount of the ordinary deduction if that child commenced receiving further education in a place outside Malaysia at any time in the basis year for the year of assessment 1994 or at any time in the basis year for any prior year of assessment; or (iii) twice the amount of the ordinary deduction if that child commenced receiving further education in a place outside Malaysia beginning from 1 January 1994 to 16 October 1997.”. Amendment of section 60 13. Section 60 of the principal Act is amended— (a) by substituting for the full stop at the end of paragraph (2)(c) a colon; Finance 13 (b) by inserting after paragraph (2)(c) the following proviso: “Provided that— (i) where the insurer also carries on life re-insurance business, the life re-insurance business shall be a separate source from life business and shall be treated as a general business; or (ii) where the insurer also carries on inward life re-insurance business, the inward life re-insurance business shall be a separate source from life business and shall be treated as a general business;”; (c) by inserting after the proviso to paragraph (2)(c) the following paragraph: “(d) where an insurer carries on only life re-insura