FINANCE (NO. 2) ACT 2014

Finance (No. 2) laws OF MalaYsIa act 764 FInance (nO. 2) act 2014 1 2 Date of Royal Assent Laws of Malaysia Act 764 ... ... 24 December 2014 Date of publication in the Gazette ... ... ... 30 December 2014 Publisher’s copyright c Percetakan nasIOnal MalaYsIa berhad All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording and/or otherwise without the prior permission of Percetakan nasional Malaysia berhad (appointed Printer to the Government of Malaysia). Finance (No. 2) laws OF MalaYsIa act 764 FInance (nO. 2) act 2014 ARRANGEMENT OF sEcTiONs chapter i PRELiMiNARY section 1. short title 2. Amendment of Acts Chapter ii AMENDMENTs TO ThE iNcOME TAx AcT 1967 3. commencement of amendments to the income Tax Act 1967 4. Amendment of section 5 5. Amendment of section 29 6. Amendment of section 46 7. Amendment of section 48 8. Amendment of section 60 9. Amendment of section 60aa 10. Amendment of section 60i 11. Amendment of section 75b 12. Amendment of section 77C 13. Amendment of section 91 14. Amendment of section 99 15. Amendment of section 107C 16. New section 110C 17. Amendment of section 112 18. Amendment of section 115 19. Amendment of section 120 20. Amendment of schedule 1 3 4 Laws of Malaysia Act 764 section 21. Amendment of schedule 3 22. Amendment of schedule 6 23. Amendment of schedule 7a chapter iii AMENDMENTs TO ThE PETROLEuM (iNcOME TAx) AcT 1967 24. commencement of amendments to the Petroleum (income Tax) Act 1967 25. Amendment of section 39 26. Amendment of section 49a chapter iV AMENDMENTs TO ThE REAL PROPERTY GAiNs TAx AcT 1976 27. commencement of amendments to the Real Property Gains Tax Act 1976 28. Amendment of section 21b 29. Amendment of schedule 2 5 Finance (No. 2) laws OF MalaYsIa act 764 FInance (nO. 2) act 2014 An Act to amend the income Tax Act 1967, the Petroleum (income Tax) Act 1967 and the Real Property Gains Tax Act 1976. [ ] enacted by the Parliament of Malaysia as follows: Chapter i PRELiMiNARY short title 1. This Act may be cited as the Finance (No. 2) Act 2014. amendment of acts 2. The income Tax Act 1967 [Act 53], the Petroleum (income Tax) Act 1967 [Act 543] and the Real Property Gains Tax Act 1976 [Act 169] are amended in the manner specified in chapters ii, iii and iV respectively. 6 Laws of Malaysia Act 764 chapter ii AMENDMENTs TO ThE iNcOME TAx AcT 1967 commencement of amendments to the Income tax act 1967 3. (1) sections 4, 5, 6, 7, 8, 9, 10, 12 and 16, subparagraphs 20(a)(i), (ii), (iii) and (v), subsubparagraph 20(a)(iv)(b), paragraph 20(b), section 21, paragraphs 22(b) and (c), and section 23 have effect for the year of assessment 2015 and subsequent years of assessment. (2) sections 11, 13 and 14, paragraph 15(a), sections 17, 18 and 19, subsubparagraph 20(a)(iv)(A) and paragraph 22(a) come into operation on the coming into operation of this Act. (3) Paragraph 15(b) comes into operation on 1 January 2015. amendment of section 5 4. section 5 of the income Tax Act 1967, which is referred to as the “principal Act” in this chapter, is amended— (a) in subsection (1)— (i) in paragraph (f), by substituting for the colon at the end of that paragraph a full stop; and (ii) by deleting the proviso to that subsection; and (b) by inserting after subsection (1) the following subsection: “(1a) For the purpose of ascertaining the chargeable income of a person under subsection (1), any amount or income received by that person which is subject to deduction of tax under section 109C, 109e or 109g shall be excluded.”. Finance (No. 2) 7 amendment of section 29 5. section 29 of the principal Act is amended— (a) in subsection (3)— (i) in paragraph (a), by deleting the word “or” at the end of that paragraph; and (ii) by inserting after paragraph (a) the following paragraph: “(aa) between individuals who are relatives of each other; or”; and (b) by inserting after subsection (3) the following subsections: “(4) subject to subsection (3) and for the purposes of this section, where a relevant person is entitled to any gross income— (a) accruing in or derived from Malaysia to which section 25, section 27 other than subsection 27(1a), or section 28 applies; (b) the amount of whic h r e la te s to a ny transactions— (i) between persons one of whom has control over the other; (ii) between individuals who are relatives of each other; or (iii) between persons both of whom are controlled by some other persons; and (c) the amount of which first becomes receivable to the relevant person in the relevant period, the relevant person is deemed to be able to obtain on demand the receipt of such amount in the basis period immediately following the relevant period. (5) in this section, “relative” and “transaction” have the meanings assigned to them under subsection 140(8).”. 8 Laws of Malaysia Act 764 amendment of section 46 6. subsection 46(1) of the principal Act is amended— (a) in paragraph (d), by substituting for the word “five” the word “six”; and (b) in paragraph (g), by substituting for the word “five” the word “six”. amendment of section 48 7. Paragraph 48(2)(b) of the principal Act is amended by substituting for the word “five” the word “six”. amendment of section 60 8. section 60 of the principal Act is amended by inserting after subsection (4b) the following subsection: “(4C) For the purposes of ascertaining the adjusted income of the life fund, shareholders’ fund or general business referred to in subsection (3), (3a), (4), (4a), (5) or (6), as the case may be, the cost of acquiring and realizing any investments or rights for the basis period for a year of assessment shall include expenses incurred in managing those investments or rights, and such expenses incurred shall be determined in accordance with the following formula: Ax c b where A is the cost of acquiring any investments or rights which is realized in that period in respect of such fund or general business; b is the total cost of acquiring all investments or rights held during that period in respect of such fund or general business; and c is the total expenses incurred in that period for managing all investments or rights held during that period in respect of such fund or general business.”. Finance (No. 2) 9 amendment of section 60AA 9. section 60aa of the principal Act is amended— (a) in paragraph (5)(b)— (i) in subparagraph (iii), by inserting after the word “business” the words “carried out in accordance with the principle of mudharabah”; and (ii) in subparagraph (viii), by inserting after the words “general business” the words “carried out in accordance with the principle of mudharabah”; (b) in paragraph (7)(b)— (i) in subparagraph (iii), by inserting after the words “Malaysian general certificate” the words “of that business carried out in accordance with the principle of mudharabah”; and (ii) in subparagraph (viii), by inserting after the words “general business” the words “carried out in accordance with the principle of mudharabah”; (c) in subsection (9)— (i) in paragraph (a)— (A) in subparagraph (iii), by substituting for the words “family fund, general fund, inward re-takaful fund, offshore fund or family re-takaful fund” the words “general fund, inward re-takaful fund, offshore fund or family re-takaful fund, or any other fee receivable in respect of an investment fund from the family fund”; (b) in subparagraph (iv), by deleting the word “and” at the end of that subparagraph; and (c) by inserting after subparagraph (v) the following subparagraph: “(vi) the amount of actuarial surplus from the family fund that is transferred to the shareholders’ fund; and”; and 10 Laws of Malaysia Act 764 (ii) in paragraph (b)— (A) in subparagraph (iii), by substituting for the words “family and general businesses” the words “general business carried out in accordance with the principle of wakalah”; and (b) in subparagraph (iv), by inserting after the words “general business” the words “carried out in accordance with the principle of wakalah”; (d) in subsection (10)— (i) in paragraph (a)— (A) in subparagraph (iii), by substituting for the words “family fund, general fund, inward re-takaful fund, offshore fund or family re-takaful fund” the words “general fund, inward re-takaful fund, offshore fund or family re-takaful fund, or any other fee receivable in respect of an investment fund from the family fund”; (b) in subparagraph (iv), by deleting the word “and” at the end of that subparagraph; and (c) by inserting after subparagraph (v) the following subparagraph: “(vi) the amount of actuarial surplus from the family fund that is transferred to the shareholders’ fund; and”; and (ii) in paragraph (b)— (A) in subparagraph (iii), by substituting for the words “family and general businesses” the words “general business carried out in accordance with the principle of wakalah”; and Finance (No. 2) 11 (b) in subparagraph (iv), by inserting after the words “general business” the words “carried out in accordance with the principle of wakalah”; and (e) by inserting after subsection (10) the following subsection: “(10 a ) For the purposes of ascertaining the adjusted income of the family fund, general fund or shareholders’ fund referred to in subsection (3), (4), (5), (7), (9) or (10), as the case may be, the cost of acquiring and realizing any investments or rights for the basis period for a year of assessment shall include expenses incurred in managing those investments or rights, and such expenses incurred shall be determined in accordance with the following formula: Ax c b where A is the cost of acquiring any investments or rights which is realized in that period in respect of such fund; b is the total cost of acquiring all investments or rights held during that period in respect of such fund; and c is the total expenses incurred in that period for managing all investments or rights held during that period in respect of such fund.”. amendment of section 60i 10. section 60i of the principal Act is amended by inserting after subsection (3) the following subsection: “(3a) For the purposes of subsections (1) and (3), the company referred to in those sections shall include a unit trust which is approved by the securities commission as Real Estate investment Trust or Property Trust Fund.”. 12 Laws of Malaysia Act 764 amendment of section 75b 11. section 75b of the principal Act is amended by inserting after subsection (2) the following subsections: “(3) Where in a year of assessment, a partnership or a company has converted into a limited liability partnership in accordance with the Limited Liability Partnerships Act 2012— (a) every partner of the partnership shall continue to be personally assessable and chargeable to tax for that year of assessment and for any previous year of assessment before the conversion in respect of his chargeable income for any such year of assessment; and (b) the limited liability partnership shall be assessable and chargeable to tax for that year of assessment and for any previous year of assessment before the conversion in respect of the chargeable income of the company for any such year of assessment. (4) Where the limited liability partnership is so assessable and chargeable under paragraph (3)(b), it shall be assessable and chargeable to tax in like manner and to the like amount as the company would have been assessed and charged to tax prior to the conversion.”. amendment of section 77c 12. subsection 77C(1) of the principal Act is amended— (a) in paragraph (a), by deleting the words “other than gains or profits in respect of the use or enjoyment of benefits provided by his employer under paragraph 13(1)(b) or (1)(c)”; and (b) in paragraph (c), by deleting the words “for a period of twelve months”. Finance (No. 2) 13 a