FINANCE ACT 2014

Finance laws OF MalaYsIa act 761 FInance act 2014 1 2 Date of Royal Assent Laws of Malaysia Act 761 ... ... 15 January 2014 Date of publication in the Gazette ... ... ... 23 January 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 laws OF MalaYsIa act 761 FInance 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 2 5. New section 4C 6. Amendment of section 6 7. Amendment of section 18 8. Amendment of section 21a 9. Amendment of section 24 10. Amendment of section 29 11. Amendment of section 33 12. Amendment of section 39 13. Amendment of section 44 14. Amendment of section 46 15. Amendment of section 49 16. Amendment of section 60aa 17. Amendment of section 60f 18. Amendment of section 60h 19. Amendment of section 63b 20. Amendment of section 75a 21. Amendment of section 77a 22. New section 77C 23. Amendment of section 99 3 4 Laws of Malaysia Act 761 Section 24. Amendment of section 102 25. Amendment of section 107C 26. Amendment of section 109e 27. Amendment of section 109g 28. New section 132b 29. Amendment of section 140 30. New section 140b 31. Amendment of Schedule 1 32. Amendment of Schedule 3 Chapter iii AMENDMENTS TO THE STAMP AcT 1949 33. commencement of amendments to the Stamp Act 1949 34. Amendment of section 9 35. Amendment of section 47a Chapter iV AMENDMENTS TO THE PETROLEUM (iNcOME TAX) AcT 1967 36. commencement of amendments to the Petroleum (income Tax) Act 1967 37. Amendment of section 2 38. Amendment of section 30 39. Amendment of section 46 40. New chapter 1a 41. Amendment of section 72a 42. Amendment of section 83 43. Amendment of First Schedule Chapter V AMENDMENTS TO THE REAL PROPERTY GAiNS TAX AcT 1976 44. commencement of amendments to the Real Property Gains Tax Act 1976 Finance 5 Section 45. Amendment of section 14 46. Amendment of section 15 47. Amendment of section 29 48. Amendment of Schedule 1 49. Amendment of Schedule 5 Chapter Vi AMENDMENTS TO THE LABUAN BUSiNESS AcTiViTY TAX AcT 1990 50. commencement of amendments to the Labuan Business Activity Tax Act 1990 51. Amendment of section 21 52. New section 21a 6 Laws of Malaysia Act 761 7 Finance laws OF MalaYsIa act 761 FInance act 2014 An Act to amend the income Tax Act 1967, the Stamp Act 1949, the Petroleum (income Tax) Act 1967, the Real Property Gains Tax Act 1976 and the Labuan Business Activity Tax Act 1990. [ ] enacted by the Parliament of Malaysia as follows: Chapter i PRELiMiNARY short title 1. This Act may be cited as the Finance Act 2014. 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], the Real Property Gains Tax Act 1976 [Act 169] and the Labuan Business Activity Tax Act 1990 [Act 445] are amended in the manner specified in chapters ii, iii, iV, V and Vi respectively. 8 Laws of Malaysia Act 761 Chapter ii AMENDMENTS TO THE iNcOME TAX AcT 1967 commencement of amendments to the Income tax act 1967 3. (1) Sections 4, 5, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 21, 22, 25, 26 and 30 have effect for the year of assessment 2014 and subsequent years of assessment. (2) Sections 6, 20, 23, 24, 27, 28, 29, 31 and 32 come into operation on the coming into operation of this Act. amendment of section 2 4. The income Tax Act 1967, which is referred to as the “principal Act” in this chapter, is amended in subsection 2(1)— (a) by inserting after the definition of “co-operative society” the following definition: ‘ “deferred annuity” means deferred annuity contracted on or after 1 January 2014 issued by insurers licensed under the Financial Services Act 2013 [Act 758] or takaful operators registered under the islamic Financial Services Act 2013 [Act 759], and contains the Retirement Saving Standards approved by the central Bank;’; (b) by inserting after the definition of “partnership” the following definition: ‘ “permanent total disablement” has the same meaning assigned to it in the Employees’ Social Security Act 1969 [Act 4];’; and (c) by inserting after the definition of “Securities commission” the following definition: ‘ “serious disease” means acquired immunity deficiency syndrome, Parkinson’s disease, cancer, renal failure, leukaemia or other similar diseases;’. Finance 9 new section 4c 5. The principal Act is amended by inserting after section 4b the following section: “Gains or profits from a business arising from stock in trade parted with by any element of compulsion 4c. For the purpose of paragraph 4(a), gains or profits from a business shall include an amount receivable arising from stock in trade parted with by any element of compulsion including on requisition or compulsory acquisition or in a similar manner.”. amendment of section 6 6. Subsection 6(1) of the principal Act is amended by substituting for paragraph (l) the following paragraph: “(l) subject to section 109g but notwithstanding any other provisions of this Act, income tax shall be charged for a year of assessment upon the income of an individual consisting of the total amount received in respect of withdrawal from a deferred annuity or a private retirement scheme where such withdrawal is made by that individual before reaching the age of fifty-five (other than by reason of permanent total disablement, serious disease, mental disability, death or permanently leaving Malaysia) at the appropriate rate as specified under Part XVi of Schedule 1.”. amendment of section 18 7. Section 18 of the principal Act is amended in the definition of “entertainment”, by inserting after the words “an employee of his” the words “, with or without any consideration paid whether in cash or in kind, in promoting or”. 10 Laws of Malaysia Act 761 amendment of section 21A 8. Section 21a of the principal Act is amended— (a) in subsection (3), by substituting for the words “other than 31 December” the words “in a basis year”; and (b) by substituting for subsection (4) the following subsection: “(4) Subject to subsections (5) and (6), where a company, limited liability partnership, trust body or co-operative society commences operation on a day in a basis year for a year of assessment (hereinafter referred to as the “first year of assessment”) and makes up its account— (a) for a period of less than twelve months ending on a day in that basis year, that period shall constitute the basis period for the first year of assessment; (b) for any period of months ending on a day in the immediately following basis year (hereinafter referred to as the “second basis year”), that period shall constitute the basis period for the year of assessment (hereinafter referred to as the “second year of assessment”) immediately following the first year of assessment, there shall be no basis period in relation to any of its sources of income for the first year of assessment; or (c) for a period of more than twelve months ending on a day in the basis year immediately following the second basis year, that period shall constitute the basis period for the year of assessment immediately following the second year of assessment and there shall be no basis period in relation to any of its sources of income for the first year of assessment and the second year of assessment.”. Finance 11 amendment of section 24 9. Subsection 24(1) of the principal Act is amended— (a) in paragraph (a), by deleting the words “(or parted with on requisition or compulsory acquisition or in similar manner)”; and (b) by inserting after paragraph (a), the following paragraph: “(aa) any stock in trade parted with by any element of compulsion including on requisition or compulsory acquisition or in a similar manner, in or before the relevant period;”. amendment of section 29 10. Section 29 of the principal Act is amended by inserting after subsection (2) the following subsection: “(3) For the purposes of this section, where gross income from a source in Malaysia of the relevant person consists of interest that relates to a loan— (a) between persons one of whom has control over the other; or (b) between persons both of whom are controlled by some other person, the relevant person is deemed to be able to obtain on demand the receipt of such interest when such interest is due to be paid to the relevant person in the relevant period.”. amendment of section 33 11. Section 33 of the principal Act is amended by inserting after subsection (3) the following subsection: “(4) For the purposes of paragraph (1)(a) and subsection (2), where any sum payable for a basis period for a year of assessment is not due to be paid in that period, the sum shall when it is due to be paid be deducted in arriving at the adjusted income of a person for that period.”. 12 Laws of Malaysia Act 761 amendment of section 39 12. Section 39 of the principal Act is amended by inserting after subsection (1) the following subsection: “(1 a ) Notwithstanding any provision of this Act, where a person is required under section 81 to furnish to the Director General any information within the time specified in a notice or such other time as may be allowed by the Director General, and that information concerns wholly or in part a deduction claimed by that person in arriving at the adjusted income of that person from any source for the basis period for a year of assessment, no deduction from the gross income from that source for that period shall be allowed in respect of such claim if the person fails to provide such information within the time specified in that notice or such extended time as allowed by the Director General.”. amendment of section 44 13. Subsection 44(7) of the principal Act is amended in the definition of “organization”— (a) in subparagraph (c)(i), by inserting after the word “improvement” the words “, purchase”; (b) in subsubparagraph (c)(i)(A), by inserting after the word “constructed” the words “or purchased”; and (c) in subsubparagraph (c)(i)(B), by inserting after the word “constructed” the words “or purchased”. amendment of section 46 14. Subsection 46(2) of the principal Act is amended by deleting the definition of “serious disease”. amendment of section 49 15. Section 49 of the principal Act is amended— (a) in paragraph (1d)(a), by substituting for the words “any deferred annuity” the words “premium for deferred annuity”; and Finance 13 (b) in subsection (3), by inserting after the words “subsection (1)” the words “and (1d)”. amendment of section 60AA 16. Section 60aa of the principal Act is amended— (a) in subparagraph (5)(b)(vi), by deleting the word “and” at the end of that subparagraph; (b) in subparagraph (5)(b)(vii), by substituting for the full stop at the end of that subparagraph the words “; and”; (c) by inserting after subparagraph (5)(b)(vii) the following subparagraph: “(viii) management expenses incurred by him in that period in connection with his general business.”; (d) in subparagraph (7)(b)(vi), by deleting the word “and” at the end of that subparagraph; (e) in subparagraph (7)(b)(vii), by substituting for the full stop at the end of that subparagraph the words “; and”; (f) by inserting after subparagraph (7)(b)(vii) the following subparagraph: “(viii) management expenses incurred by him in that period in connection with his general business.”; (g) in subparagraph (9)(b)(ii), by deleting the word “and” at the end of that subparagrap