FINANCE ACT 2020

Finance LAWS OF MALAYSIA Act 831 FINANCE ACT 2020 1 2 Laws of Malaysia Act 831 Date of Royal Assent ... ... 31 December 2020 Date of publication in the Gazette ... ... 31 December 2020 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 LAWS OF MALAYSIA Act 831 FINANCE ACT 2020 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 6 6. New section 6d 7. Amendment of section 34 8. Amendment of section 34a 9. Amendment of section 34b 10. Amendment of section 39 11. Amendment of section 44 12. Amendment of section 44a 13. Amendment of section 45a 14. Amendment of section 46 15. Amendment of section 47 16. New section 65b 17. Amendment of section 77a 18. Amendment of section 83 19. Amendment of section 103 3 4 Laws of Malaysia Act 831 Section 20. New section 103b 21. Amendment of section 104 22. Amendment of section 106 23. Amendment of section 109d 24. New section 113b 25. Amendment of section 124 26. Amendment of section 140a 27. Amendment of Schedule 1 28. Amendment of Schedule 3 29. Amendment of Schedule 6 30. Amendment of Schedule 7a Chapter III AMENDMENTS TO THE REAL PROPERTY GAINS TAX ACT 1976 31. Commencement of amendments to the Real Property Gains Tax Act 1976 32. Amendment of section 14 33. Amendment of section 15 34. Amendment of section 21b 35. New section 21c 36. Amendment of section 22 37. Amendment of section 57a 38. Amendment of Schedule 5 Chapter IV AMENDMENTS TO THE STAMP ACT 1949 39. Commencement of amendments to the Stamp Act 1949 40. Amendment of section 2 41. Amendment of section 7 42. Amendment of section 9 43. Amendment of section 12 44. Amendment of section 48 Finance 5 Section 45. Amendment of section 50 46. Amendment of section 55 47. Amendment of section 74a 48. Amendment of section 80 49. New section 80b 50. Amendment of section 82 Chapter V AMENDMENTS TO THE PETROLEUM (INCOME TAX) ACT 1967 51. Commencement of amendments to the Petroleum (Income Tax) Act 1967 52. New section 48a 53. Amendment of section 49 54. New section 71b Chapter VI AMENDMENTS TO THE LABUAN BUSINESS ACTIVITY TAX ACT 1990 55. Commencement of amendments to the Labuan Business Activity Tax Act 1990 56. Amendment of section 2b 57. Amendment of section 3a 58. Amendment of section 6d 59. Amendment of section 13a 60. New section 13b 61. Amendment of section 20 62. Amendment of section 24 Chapter VII AMENDMENT TO THE FINANCE ACT 2012 63. Commencement of amendment to the Finance Act 2012 64. Amendment of section 3 6 Laws of Malaysia Chapter VIII AMENDMENT TO THE FINANCE ACT 2018 Section 65. Commencement of amendment to the Finance Act 2018 66. Amendment of section 3 Act 831 7 Finance LAWS OF MALAYSIA Act 831 FINANCE ACT 2020 An Act to amend the Income Tax Act 1967, the Real Property Gains Tax Act 1976, the Stamp Act 1949, the Petroleum (Income Tax) Act 1967, the Labuan Business Activity Tax Act 1990, the Finance Act 2012 and the Finance Act 2018. [ ] ENACTED by the Parliament of Malaysia as follows: Chapter I PRELIMINARY Short title 1. This Act may be cited as the Finance Act 2020. Amendment of Acts 2. The Income Tax Act 1967 [Act 53], the Real Property Gains Tax Act 1976 [Act 169], the Stamp Act 1949 [Act 378], the Petroleum (Income Tax) Act 1967 [Act 543], the Labuan Business Activity Tax Act 1990 [Act 445], the Finance Act 2012 [Act 742] and the Finance Act 2018 [Act 812] are amended in the manner specified in Chapters II, III, IV, V, VI, VII and VIII respectively. 8 Laws of Malaysia Act 831 Chapter II AMENDMENTS TO THE INCOME TAX ACT 1967 Commencement of amendments to the Income Tax Act 1967 3. (1) Sections 4, 5, 6, 13, 15, 16, 17, 23 and 27, and subparagraphs 14(a)(i), (ii), (iii), (iv) and (v), subparagraph 14(a)(viii) and paragraph 14(b) in relation to paragraph 46(1)(u) of the Income Tax Act 1967, and paragraph 28(a) have effect for the year of assessment 2021 and subsequent years of assessment. (2) Sections 7, 8 and 9 come into operation on the coming into operation of this Act. (3) Sections 10, 11, 18, 20, 21, 24, 25 and 26, and paragraph 28(b) come into operation on 1 January 2021. (4) Section 12 has effect for the year of assessment 2022 and subsequent years of assessment. (5) Subparagraphs 14(a)(vi) and (vii), subparagraph 14(a)(viii) in relation to paragraph 46(1)(s) of the Income Tax Act 1967, paragraph 14(b) in relation to paragraphs 46(1)(r) and (s) of the Income Tax Act 1967, and section 29 have effect for the years of assessment 2020 and 2021. (6) Subparagraph 14(a)(viii) and paragraph 14(b) in relation to paragraph 46(1)(t) of the Income Tax Act 1967 have effect for the year of assessment 2020. (7) Sections 19 and 22 are deemed to have come into operation on 1 January 2020. (8) Section 30 has effect for the years of assessment 2020, 2021 and 2022. Amendment of section 5 4. The Income Tax Act 1967, which is referred to as the “principal Act” in this Chapter, is amended in subsection 5(1a) by inserting after the words “section 109c,” the words “109d,”. Finance 9 Amendment of section 6 5. Section 6 of the principal Act is amended— (a) in subsection (1)— (i) in paragraph (a), by substituting for the words “section 6a” the words “sections 6a and 6d”; (ii) in paragraph (l), by substituting for the full stop at the end of that paragraph a semi colon; and (iii) by inserting after paragraph (l) the following paragraphs: “(m) income tax shall be charged for each year of assessment upon the chargeable income of a person who carries on business in respect of a qualifying activity under an incentive scheme approved by the Minister at the appropriate rate as specified in Part XVII of Schedule 1; (n) income tax shall be charged for each year of assessment upon the chargeable income of an individual resident who is not a citizen having and exercising employment in a company which carries on business in respect of a qualifying activity under an incentive scheme approved by the Minister at the appropriate rate as specified in Part XVIII of Schedule 1.”; and (b) by inserting after subsection (1) the following subsection: “ ( 1 a ) A n i n c e n t i v e s c h e m e r e f e r r e d t o i n paragraphs (1)(m) and (n) shall be the incentive scheme for a qualifying activity prescribed by the Minister which includes— (a) any high technology activity in manufacturing and services sector; and (b) any other activities which would benefit the economy of Malaysia.”. 10 Laws of Malaysia Act 831 New section 6d 6. The principal Act is amended by inserting after the deleted section 6c the following section: “Tax rebate for company or limited liability partnership 6 d . (1) A rebate may be granted for a period of three consecutive years from the year of assessment in which a company or limited liability partnership first commences operation, in an amount equivalent to its operating or capital expenditure which it has incurred limited to a maximum amount of twenty thousand ringgit for each year of assessment. (2) Where the total amount of the rebate under subsection (1) exceeds the income tax charged (before any such rebate) for any year of assessment, the excess shall not be paid to the company or limited liability partnership, or be available as credit to set off the tax liability of the company or limited liability partnership for that year of assessment or any subsequent year. (3) The company or limited liability partnership referred to in subsection (1) shall be a company or limited liability partnership resident and incorporated or registered in Malaysia— (a) which has a paid-up capital in respect of ordinary shares or contribution of capital (whether in cash or in kind) of two million and five hundred thousand ringgit and less at the beginning of the basis period for a year of assessment; (b) which has a gross income from source or sources consisting of a business not exceeding fifty million ringgit for the basis period for that year of assessment; and (c) which has commenced operation on or after 1 July 2020 but not later than 31 December 2021. (4) The Minister may, by statutory order, impose such conditions as he thinks fit to give effect to or for carrying out the purposes of this section. Finance 11 (5) Where in a year of assessment the company or limited liability partnership fails to fulfil the conditions specified in subsection (3) or (4), the amount of rebate under subsection (1) shall not be granted for that year of assessment in which the failure occurs and in the subsequent years of assessment. (6) The statutory order made under subsection (4) shall be laid before the Dewan Rakyat.”. Amendment of section 34 7. Subsection 34(7) of the principal Act is amended by inserting after the words “relevant person” the words “resident in Malaysia”. Amendment of section 34a 8. Section 34a of the principal Act is amended— (a) in subsection (1)— (i) by inserting after the words “a person” the words “resident in Malaysia”; and (ii) by inserting after the words “by the Minister” the words “and the amount of expenses on research and development incurred during that period outside Malaysia shall not be more than thirty per cent of the total expenses on research and development incurred by that person”; (b) in subsection (4), by substituting for the proviso to that subsection the following proviso: “Provided that the amount of deduction to be made shall be the amount of expenditure incurred— (a) where the amount of expenses on research and development incurred for the basis period for a year of assessment outside Malaysia is more 12 Laws of Malaysia Act 831 than thirty per cent of the total expenses on research and development incurred by that person; or (b) where subsection (4a) applies.”; and (c) in subsection (4a), by inserting after the words “A pioneer company” the words “resident in Malaysia”. Amendment of section 34b 9. Subsection 34b(1) of the principal Act is amended by inserting after the words “a person” the words “resident in Malaysia”. Amendment of section 39 10. Paragraph 39(1)(r) of the principal Act is amended by substituting for the words “Labuan company” the words “Labuan entity referred to in paragraph 2b(1)(a) of the Labuan Business Activity Tax Act 1990”. Amendment of section 44 11. Section 44 of the principal Act is amended— (a) in subparagraph (5b)(a)(ii), by deleting the word “nominal”; and (b) in paragraph (5c)(a), by deleting the word “nominal”. Amendment of section 44a 12. Paragraph 44a(3)(c) of the principal Act is amended by inserting after the word “indirectly” the words “(through the medium of other companies resident and incorporated in Malaysia)”. Finance 13 Amendment of section 45a 13. Subsection 45 a (1) of the principal Act is amended by substituting for the words “three thousand five hundred ringgit” the words “five thousand ringgit”. Amendment of section 46 14. Section 46 of the principal Act is amended— (a) in subsection (1)— (i) in paragraph (c), by substituting for the words “five thousand ringgit” the words “eight thousand ringgit”; (ii) 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 Masters or Doctorate degree, undertaken for the purpose of acquiring legal, accounting, Islamic financing, technic