FINANCE ACT 2007

Finance LAWS OF MALAYSIA REPRINT Act 683 FINANCE ACT 2007 As at 1 October 2018 PUBLISHED BY THE COMMISSIONER OF LAW REVISION, MALAYSIA UNDER THE AUTHORITY OF THE REVISION OF LAWS ACT 1968 2018 1 2 Laws of Malaysia Act 683 FINANCE ACT 2007 Date of Royal Assent … … … 27 December 2007 Date of publication in the Gazette … … 28 December 2007 Latest amendment made by Act 719 which came into operation on … … … see Chap. VI of Act 719 Finance LAWS OF MALAYSIA Act 683 FINANCE ACT 2007 ARRANGEMENT OF SECTIONS Chapter I PRELIMINARY Section 1. Short title 2. Amendment of Acts Chapter II Part I AMENDMENTS TO THE INCOME TAX ACT 1967 3. Commencement of amendments to the Income Tax Act 1967 4. Amendment of section 3b 5. Amendment of section 5 6. Amendment of section 6 7. Amendment of section 27 8. Amendment of section 34 9. New section 34c 10. Amendment of section 44 11. Amendment of section 44a 12. Amendment of section 46 13. Deletion of section 46a 14. Amendment of section 54a 3 4 Laws of Malaysia Section 15. Amendment of section 60aa 16. New section 60i 17. Amendment of section 67 18. Amendment of section 80 19. Amendment of section 107c 20. Amendment of section 108 21. Amendment of section 109 22. New section 109e 23. Amendment of section 110 24. Deletion of section 110a 25. New section 110b 26. Amendment of section 111 27. Deletion of section 111a 28. Amendment of section 120 29. Amendment of section 127 30. New section 142a 31. Amendment of section 152a 32. Amendment of section 153 33. Amendment of Schedule 1 34. Amendment of Schedule 3 35. Amendment of Schedule 5 36. Amendment of Schedule 6 37. Amendment of Schedule 7a Part II SAVING AND TRANSITIONAL PROVISIONS 38. General provisions 39. Balance for credit 40. Dividend paid by company 41. Dividend paid on or before 31 December 2007 42. Tax deemed deducted 43. Revision in tax rate Act 683 Finance 5 Section 44. Certificate to shareholder 45. Statement to Director General 46. Revised 108 balance 47. Reduction of 108 balance 48. Dividend paid in excess of revised 108 balance 49. Non-deduction of tax 50. Option to disregard balance 51. Set-off under section 110 52. 108 balance or revised 108 balance after 31 December 2013 53. Statutory income deemed total income 54. Debt discharge 55. Power to remit 56. Tax shall be deducted 57. Non-applicability Chapter III AMENDMENTS TO THE STAMP ACT 1949 58. Commencement of amendments to the Stamp Act 1949 59. Amendment of section 2 60. New sections 36a and 36b 61. Amendment of section 37 62. Amendment of section 38 63. Amendment of section 38a 64. Amendment of section 39 Chapter IV AMENDMENTS TO THE PETROLEUM (INCOME TAX) ACT 1967 65. Commencement of amendments to the Petroleum (Income Tax) Act 1967 66. Amendment of section 16 67. Amendment of section 22 68. Amendment of section 33 69. Amendment of Third Schedule 6 Laws of Malaysia Act 683 CHAPTER V AMENDMENTS TO THE LABUAN OFFSHORE BUSINESS ACTIVITY TAX ACT 1990 Section 70. Commencement of amendments to the Labuan Offshore Business Activity Tax Act 1990 71. Amendment of section 2 72. New section 3a 7 Finance LAWS OF MALAYSIA Act 683 FINANCE ACT 2007 An Act to amend the Income Tax Act 1967, the Stamp Act 1949, the Petroleum (Income Tax) Act 1967 and the Labuan Offshore Business Activity Tax Act 1990. [ ] BE IT ENACTED by the Parliament of Malaysia as follows: Chapter I PRELIMINARY Short title 1. This Act may be cited as the Finance Act 2007. Amendment of Acts 2. The Income Tax Act 1967 [Act 53], the Stamp Act 1949 [Act 378], the Petroleum (Income Tax) Act 1967 [Act 543] and the Labuan Offshore Business Activity Tax Act 1990 [Act 445] are amended in the manner specified in Chapters II, III, IV and V respectively. 8 Laws of Malaysia Act 683 Chapter II Part I AMENDMENTS TO THE INCOME TAX ACT 1967 Commencement of amendments to the Income Tax Act 1967 3. (1) Sections 4, 5, 8, paragraphs 10(a) and (d), subparagraphs 12(a)(i) and (iv) in respect of paragraph 46(1)(l) of the Income Tax Act 1967, sections 14, 15, 17, 19, 20, 21, 23, 24, 25, 26, 27, 29, 33, 34, paragraphs 36(a) and (f) and sections 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56 and 57 have effect for the year of assessment 2008 and subsequent years of assessment. (2) Sections 6 and 22 come into operation on 1 January 2008. (3) Subparagraphs 12(a)(ii), (iii) and (iv) in respect of paragraph 46(1)(k) of the Income Tax Act 1967, section 16 and paragraph 36(d) have effect for the year of assessment 2007 and subsequent years of assessment. (4) Sections 7, 9, 11 and 13 are deemed to have effect for the year of assessment 2006 and subsequent years of assessment. (5) Section 28 comes into operation on 1 August 2008. (6) Section 32 is deemed to have come into operation on 21 February 2007. (7) Paragraphs 36(b), (c) and (e) come into operation on 1 January 2014. Amendment of section 3b 4. The Income Tax Act 1967, which is referred to as the “principal Act” in this Chapter, is amended in section 3 b by inserting after the words “offshore company” the words “, other than an offshore company (in this Act referred to as “chargeable offshore company”), which has made an election under section 3a of the Labuan Offshore Business Activity Tax Act 1990”. Finance 9 Amendment of section 5 5. Subsection 5(1) of the principal Act is amended by substituting for the proviso to that subsection the following proviso: “Provided that in ascertaining the chargeable income of— (i) an individual resident in Malaysia there shall be excluded the income consisting of interest accruing in or derived from Malaysia and received from a person referred to in subsection 109c(4) in respect of interest paid or credited to that individual; or (ii) a participant other than a participant which is a resident company there shall be excluded any income accruing in or derived from Malaysia and received from a takaful operator referred to in subsection 109 e (2) in respect of such income paid or credited to that participant.”. Amendment of section 6 6. Subsection 6(1) of the principal Act is amended— (a) by substituting for the full stop at the end of paragraph (i) a semicolon; and (b) by inserting after paragraph (i) the following paragraph: “(j) subject to the provision of section 109 e but notwithstanding any other provisions of this Act, income tax shall be charged for each year of assessment upon the income of a participant, other than a participant which is a resident company, which consists of profits distributed or credited by an operator referred to in section 60aa at the appropriate rate as specified under Part XI of Schedule 1.”. 10 Laws of Malaysia Act 683 Amendment of section 27 7. Section 27 of the principal Act is amended— (a) by inserting after subsection (1) the following subsection: “(1a) Where gross income from a source in Malaysia of a company consists of any amount of discount or premium from the subscription or issuance of bond, as the case may be, and first becomes receivable in the relevant period, that amount shall be deemed to accrue over the whole period of the bond and the gross income of the company for the relevant period that relates to the period of the bond shall be a sum to be determined in accordance with the following formula: A X C B where A is the number of days in the relevant period that falls within the period of the bond; B is the total number of days of the whole period of the bond; and C is the total amount of discount or premium in respect of the bond: Provided that the Director General may allow the company to consistently apply any other formula which is in accordance with the generally accepted accounting principles applicable during the relevant period.”; (b) in subsection (2), by inserting after the words “subsection (1)” the words “or (1a)”; and (c) in subsection (3), by inserting after the words “subsection (1)” the words “or (1a)”. Finance 11 Amendment of section 34 8. Subsection 34(6) of the principal Act is amended— (a) in paragraph (e), by inserting after the word “equipment” the words “, or on the alteration or renovation of premises,”; and (b) by inserting after paragraph (h) the following paragraph: “(ha) an amount equal to the expenditure incurred by a company on the provision of infrastructure in relation to its business which is available for public use, subject to the prior approval of the Minister: 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);”. New section 34c 9. The principal Act is amended by inserting after section 34b the following section: “Special provision applicable to adjusted income from a discount or premium 34c. (1) Notwithstanding section 33 but subject to this section, in ascertaining the adjusted income of a company from a source consisting of discount or premium, any expenses in respect of the discount or premium incurred on bond issued or subscribed, as the case may be, by that company is deemed to accrue to the company over the whole period of the bond and the amount to be deducted from the gross income from that source for the basis period for a year of assessment that relates to the period of the bond shall be a sum to be determined in accordance with the following formula: A X C B where A is the number of days in the basis period for the year of assessment that falls within the period of the bond; 12 Laws of Malaysia Act 683 B is the total number of days of the whole period of the bond; and C is the total amount of discount or premium incurred in respect of the bond: Provided that the Director General may allow the company to consistently apply any other formula which is in accordance with the generally accepted accounting principles applicable during that basis period. (2) 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, 34a or 34b.”. Amendment of section 44 10. Section 44 of the principal Act is amended— (a) in the proviso to subsection (6), by substituting for the word “company” wherever appearing the word “person”; (b) in subsection (6a), by substituting for the words “Department of Museum and Antiquities” the words “Department of Museums Malaysia”; (c) by inserting after subsection (6a) the following subsection: “(6 b ) Where an institution or organization is aggrieved by the decision of the Director General in respect of an application made under subsection (6), the institution or organization may, within thirty days after being informed of the decision, appeal to the Minister and the Minister may make any decision as he considers fit.”; and (d) in subsection (11a), by inserting after the words “offshore company” the words “excluding chargeable offshore company”. Finance 13 Amendment of section 44a 11. Paragraph 44a(10)(d) of the principal Act is amended by substituting for the word “2001” the word “2006”. Amendment of section 46 12. Section 46 of the principal Act is amended— (a) in subsection (1)— (i) by substituting for paragraph (f) the following paragraph: “(f) fees expended in that basis year by that individual on himself for— (i) any course of study up to tertiary level, other than a degree at Masters or Doctorate level, undertaken for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications; or (ii) any course of study for a degree at Masters or Doctorate level undertaken for the purpose of acquiring any skill or qualification, in any institution or professional body in Malaysia recognized by the Government or approved by the Minister, as the case ma