FINANCE ACT 1981

Finance LAWS OF MALAYSIA REPRINT Act 241 FINANCE ACT 1981 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 1981 Date of Royal Assent ... ... ... … … 12 January 1981 Date of publication in the Gazette … ... 15 January 1981 PREVIOUS REPRINT First Reprint ... ... ... ... ... 2001 3 LAWS OF MALAYSIA Act 241 FINANCE ACT 1981 ARRANGEMENT OF SECTIONS CHAPTER I PRELIMINARY Section 1. Short title and commencement 2. Amendment of Acts and Ordinance CHAPTER II AMENDMENTS TO THE INCOME TAX ACT 1967 3. Commencement of amendments to Income Tax Act 1967 4. Amendment of section 5 5. New section 6 B 6. Amendment of section 7 7. New section 13A 8. Amendment of section 18 9. Amendment of section 22 10. Amendment of section 39 11. Amendment of section 47 12. Amendment of section 49 13. Amendment of section 108 14. Amendment of section 109 15. Amendment of section 128 16. Amendment of Schedule 1 17. Amendment of Schedule 3 18. Amendment of Schedule 6 4 Laws of Malaysia ACT 241 CHAPTER III AMENDMENT TO THE SUPPLEMENTARY INCOME TAX ACT 1967 Section 19. Commencement of amendment to Supplementary Income Tax Act 1967 20. Amendment of section 16 CHAPTER IV AMENDMENTS TO THE REAL PROPERTY GAINS TAX ACT 1976 21. Commencement of amendments to Real Property Gains Tax Act 1976 22. Amendment of section 2 23. Amendment of section 8 24. Amendment of section 47 25. Amendment of Schedule 1 26. Amendment of Schedule 2 27. Amendment of Schedule 4 28. Amendment of Schedule 5 CHAPTER V AMENDMENTS TO THE STAMP ORDINANCE 1949 29. Commencement of amendments to Stamp Ordinance 1949 30. New section 5 A 31. Amendment of First Schedule Finance 5 LAWS OF MALAYSIA Act 241 FINANCE ACT 1981 An Act to amend the Income Tax Act 1967, the Supplementary Income Tax Act 1967, the Real Property Gains Tax Act 1976 and the Stamp Ordinance 1949, and to provide for matters connected therewith. [ ] 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 and commencement 1. This Act may be cited as the Finance Act 1981 and shall have effect or be deemed to have effect as provided in this Act. Amendment of Acts and Ordinance 2. The Income Tax Act 1967 [Act 53], the *Supplementary Income Tax Act 1967 [Act 54], the Real Property Gains Tax Act 1976 [Act 169] and the **Stamp Ordinance 1949 [Ord. 59 of 1949] are amended respectively in the manner specified in Chapters II, III, IV and V of this Act. *NOTE—Supplementary Income Tax Act 1967 [Act 54] has since been repealed by Finance Act [Act 497]—see subsection 16(1) of Act 497. **NOTE—Stamp Ordinance 1949 [Ord. 59 of 1949] has since been revised as Stamp Act 1949 [Act 378]. 6 Laws of Malaysia ACT 241 CHAPTER II AMENDMENTS TO THE INCOME TAX ACT 1967 Commencement of amendments to Income Tax Act 1967 3. (1) The provisions of this Chapter [except section 8, paragraph 10(b), sections 11, 12, 16 and paragraph 18(a)] shall have effect for the year of assessment 1981 and subsequent years of assessment. (2) Section 8, paragraph 10(b), sections 11, 12, 16 and paragraph 18(a) shall be deemed to have effect for the year of assessment 1980 and subsequent years of assessment. Amendment of section 5 4. Section 5 of the Income Tax Act 1967, which in this Chapter is referred to as the principal Act, is amended by inserting after subsection (3) the following subsection (4)— “(4) In ascertaining the chargeable income of a company for the purpose of section 3A there shall not be taken into account dividend income derived from Malaysia.”. New section 6B 5. The principal Act is amended by inserting after section 6A the following section 6B— “Tax rebate on loan to a small business 6 B. (1) Subject to this section, income tax charged for each year of assessment upon the chargeable income of a person who gives any loan to a small business shall be rebated by an amount equivalent to two per cent pro rated per annum, or such other rate as may be prescribed from time to time by the Minister, on the outstanding balance of the loan calculated Finance 7 on term loan basis before any set off is made under section 110 and any credit is allowed under section 132 or section 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 person and shall not be available as a credit to set off any tax liability for that year of assessment but it shall be available as a credit to set off any income tax chargeable for any subsequent year of assessment. (2) ‘Loan to a small business’ means a loan that conforms to the guidelines laid down by an appropriate authority designated by the Minister from time to time.”. Amendment of section 7 6. The principal Act is amended by substituting for paragraph 7(1)(b) the following: “(b) he is in Malaysia in that basis year for a period of less than one hundred and eighty-two days and that period forms part of a period of more than one hundred and eighty-two consecutive days (hereinafter referred to in this paragraph as such period) throughout which he is in Malaysia in the basis year for the year of assessment immediately preceding that particular year of assessment or in that basis year for the year of assessment immediately following that particular year of assessment: Provided that any temporary absence from Malaysia— (i) connected with his service in Malaysia and owing to service matters or attending conferences or seminars or study abroad; (ii) owing to ill-health involving himself or a member of his immediate family; and (iii) in respect of social visits not exceeding fourteen days in the aggregate, shall be taken to form part of such period;”. 8 Laws of Malaysia ACT 241 New section 13A 7. The principal Act is amended by inserting after section 13 the following section 13A— “Special provisions as to employment income while aboard ship 13A. (1) Notwithstanding paragraph 13(2)(e) income from a period of employment exercised aboard a ship while it is engaged in international traffic shall not be deemed to be derived from Malaysia if the ship is a Malaysian-registered ship and is used in a business operated by a person resident in Malaysia for the basis year for a year of assessment. (2) For the purposes of this section, in any calendar year the period of leave and return visits to Malaysia not exceeding sixty days in the aggregate calculated by reference to the number of days served aboard the ship upon the total number of days in a calendar year shall be deemed to be employment exercised aboard the ship. (3) For the purposes of this section, ‘international traffic’ means any voyage excluding a voyage solely between ports in Malaysia or a voyage commencing from any port in Malaysia to any port in Singapore or vice versa.”. Amendment of section 18 8. The principal Act is amended by deleting the words “except timber (whether felled or otherwise)” in the interpretation of “crops” in section 18. Amendment of section 22 9. Section 22 of the principal Act is amended— (a) by inserting the words “or deemed to have been received” after the words “any sums receivable” in subsection (2); (b) by deleting the word “and” in subparagraph (2)(a)(ii); (c) by substituting for the full stop in paragraph (2)(b) a semicolon and the word “and”; and Finance 9 (d) by inserting after paragraph (2)(b) the following: “(c) a rebate under section 6B.”. Amendment of section 39 10. Section 39 of the principal Act is amended— (a) by inserting the words “or royalty” after the word “interest” in paragraph (1)(f); and (b) by deleting the symbol “)” after the words “State Government” and inserting the symbol “)” after the words “a statutory authority” and before the words “for the use of” in paragraph (1)(g). Amendment of section 47 11. Section 47 of the principal Act is amended— (a) by substituting respectively for the symbols and figures“(4)” and “(5)” in subsection (1) the symbols and figures“(3)” and “(4)”; (b) by substituting for the symbols and figure “(4)” in subsection (2) the symbols and figure “(3)”; and (c) by substituting for the symbols and figure “(3)” after the word “and” in subsection (3) the symbols and figure “(2)”. Amendment of section 49 12. The principal Act is amended by inserting the words “five hundred” after the words “three thousand” in the proviso to subsection 49(1). Amendment of section 108 13. The principal Act is amended by inserting the words “any rebate under section 6B or” after the word “less” in subsection 108(4). 10 Laws of Malaysia ACT 241 Amendment of section 109 14. The principal Act is amended by substituting for subsection 109(1) the following: “Deduction of tax from interest or royalty in certain cases 109. (1) Where any person (in this section referred to as the payer) is liable to pay interest or royalty derived from Malaysia to any other person not known to him to be resident or to have a place of business in Malaysia, he shall upon paying or crediting the interest (other than interest on an approved loan or long-term loan or interest of the kind referred to in paragraph 33 of Part I, Schedule 6) or royalty deduct therefrom tax at the rate applicable to such interest or royalty, and (whether or not that tax is so deducted) shall within one month after paying or crediting the interest or royalty render an account and pay the amount of that tax to the Director General: Provided that the Director General may— (a) give notice in writing to the payer requiring him to deduct and pay tax at some other rates or to pay or credit the interest or royalty without deduction of tax; or (b) under special circumstances allow extension of time for tax deducted to be paid over.”. Amendment of section 128 15. The principal Act is amended by substituting for subsection 128(1) the following: “Exemption from tax: residential premises and premises where, owing to circumstances, owner is compelled to vacate 128. (1) Subject to this section— (a) where an individual who is the owner of a residence occupies the residence (hereinafter referred to in this section as that residence) as owner throughout the basis period for a year of assessment (that period Finance 11 and that year being referred to in this section as the relevant period and the relevant year respectively) or during any part of the relevant period, his gross income from the occupation for the relevant period or for that part of the relevant period, as the case maybe, shall be disregarded for the purposes of this Act; or (b) where an individual is an employee, on satisfying the Director General that as a result of being transferred by his employer to another part of Malaysia or as a result of taking up a new employment in another part of Malaysia he is compelled to vacate that residence in order to occupy another residence (not owned by him) located at a place beyond a distance of twenty miles from that residence, the rent receivable by him from that residence shall be disregarded for the purposes of this Act; or (c) where an individual is not an employee, on satisfying the Director General that he is compelled to vacate that residence in order to occupy another residence (not owned by him) located at a place beyond a distance of twenty miles from that residence immediately following a change in his business operations from one part of Malaysia to another part of Malaysia, the rent receivable by him from that residence shall be disregarded for the purposes of this Act.”. Amendment of Schedule 1 16. The principal Act is amended by deleting the letter “s” in the word “p