FINANCE ACT 2018

LAWS OF MALAYSIA ONLINE VERSION OF UPDATED TEXT OF REPRINT Act 812 FINANCE ACT 2018 As at 1 June 2023 This text is ONLY AN UPDATED TEXT of the Finance Act 2018 by the Attorney General’s Chambers. Unless and until reprinted pursuant to the powers of the Commissioner of Law Revision under subsection 14(1) of the Revision of Laws Act 1968 [Act 1], this text is NOT AN AUTHENTIC TEXT. 2 FINANCE ACT 2018 … … … ... 26 December 2018 Date of publication in the Gazette … … … ... 27 December 2018 Latest amendment made by Act 845 which came into operation on … … … ... 1 June 2023 Date of Royal Assent 3 LAWS OF MALAYSIA Act 812 FINANCE ACT 2018 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. Amendment of section 4A 6. Amendment of section 12 6A. Amendment of section 15A 7. Amendment of section 34 8. Amendment of section 34A 9. Amendment of section 39 10. Amendment of section 44 11. Special provision relating to sections 43 and 44 12. Amendment of section 44A 13. Special provision relating to section 44A 14. Amendment of section 46 15. Amendment of section 49 4 Laws of Malaysia ACT 812 Section 16. Amendment of section 60 17. Amendment of section 60A 18. Amendment of section 60AA 19. Deletion of section 60B 19A. Amendment of section 109 B 20. Amendment of section 140A 21. New section 140C 22. Amendment of section 154 23. Amendment of Schedule 1 24. Amendment of Schedule 3 25. (Deleted) 26. Amendment of Schedule 6 27. Amendment of Schedule 7A 28. Special provision relating to paragraph 4B of Schedule 7A 29. Amendment of Schedule 7B 30. Special provision relating to paragraph 5A of Schedule 7B CHAPTER III AMENDMENTS TO THE PROMOTION OF INVESTMENTS ACT 1986 31. Commencement of amendments to the Promotion of Investments Act 1986 32. Amendment of section 2 33. Amendment of section 6 34. Special provision relating to section 6 35. Amendment of section 21E 36. Amendment of section 25 37. Special provision relating to section 25 38. (Deleted) 39. (Deleted) 40. (Deleted) 41. (Deleted) Finance Section 42. (Deleted) 43. (Deleted) 44. (Deleted) 45. (Deleted) 46. (Deleted) 47. (Deleted) 48. (Deleted) 49. (Deleted) 50. (Deleted) 51. (Deleted) 52. (Deleted) 53. (Deleted) 54. (Deleted) 55. (Deleted) 56. (Deleted) 57. (Deleted) 58. (Deleted) 59. (Deleted) 60. (Deleted) 61. (Deleted) 62. Amendment of section 30A CHAPTER IV AMENDMENTS TO THE STAMP ACT 1949 63. Commencement of amendments to the Stamp Act 1949 64. Amendment of section 2 65. Amendment of section 9 66. Amendment of section 15 67. Amendment of section 15A 68. Amendment of First Schedule 5 6 Laws of Malaysia ACT 812 CHAPTER V AMENDMENTS TO THE REAL PROPERTY GAINS TAX ACT 1976 Section 69. Commencement of amendments to the Real Property Gains Tax Act 1976 69A. Amendment of Schedule 2 69B. Amendment of Schedule 3 70. Amendment of Schedule 5 CHAPTER VI AMENDMENTS TO THE LABUAN BUSINESS ACTIVITY TAX ACT 1990 71. Commencement of amendments to the Labuan Business Activity Tax Act 1990 72. Amendment of section 2 73. Amendment of section 2A 74. Amendment of section 2B 75. Amendment of section 4 76. Deletion of section 7 77. Substitution of section 8 78. Amendment of section 8A 79. Substitution of section 11 80. Amendment of section 12 81. Amendment of section 23 82. Amendment of section 25 CHAPTER VII AMENDMENTS TO THE SERVICE TAX ACT 2018 83. Commencement of amendments to the Service Tax Act 2018 84. Amendment of section 2 85. Amendment of section 7 86. Amendment of section 9 Finance Section 87. Amendment of section 11 88. Amendment of section 24 89. New section 26A 90. Amendment of section 27 CHAPTER VIII AMENDMENTS TO THE SALES TAX ACT 2018 91. Commencement of amendments to the Sales Tax Act 2018 92. Amendment of section 9 93. Amendment of section 27 94. Amendment of Part VI 95. New section 41A 96. Amendment of section 82 97. New section 88A 7 9 LAWS OF MALAYSIA Act 812 FINANCE ACT 2018 An Act to amend the Income Tax Act 1967, Promotion of Investments Act 1986, Stamp Act 1949, Real Property Gains Tax Act 1976, Labuan Business Activity Tax Act 1990, Service Tax Act 2018 and Sales Tax Act 2018. [28 December 2018] ENACTED by the Parliament of Malaysia as follows: CHAPTER I PRELIMINARY Short title 1. This Act may be cited as the Finance Act 2018. Amendment of Acts 2. The Income Tax Act 1967 [Act 53], the Promotion of Investments Act 1986 [Act 327], the Stamp Act 1949 [Act 378], the Real Property Gains Tax Act 1976 [Act 169], the Labuan Business Activity Tax Act 1990 [Act 445], the Service Tax Act 2018 [Act 807] and the Sales Tax Act 2018 [Act 806] are amended in the manner specified in Chapters II, III, IV, V, VI, VII and VIII respectively. 10 Laws of Malaysia ACT 812 CHAPTER II AMENDMENTS TO THE INCOME TAX ACT 1967 Commencement of amendments to the Income Tax Act 1967 3. (1) Sections 10, 11, 12, 15, 16, 17, 18, 19, 24, 27, 28, 29 and 30 and paragraphs 23(a), (b), (c) and (d) have effect from the year of assessment 2019 and subsequent years of assessment. (2) Section 13 has effect for the years of assessment 2019, 2020 and 2021. (3) Section 14 has effect for the years of assessment 2019, 2020, 2021, 2022, 2023 and 2024. (4) Paragraph 4(b) and sections 5, 6, 6A, 7, 8, 19A and paragraph 23(aa) come into operation on the coming into operation of this Act. (5) Paragraph 4(a) and sections 9, 20, 21, 22 and 26 come into operation on 1 January 2019. 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 substituting for the definition of “Labuan company” the following definition: ‘ “Labuan company” means a Labuan entity as provided under subsection 2B(1) of the Labuan Business Activity Tax Act 1990;’; and (b) by inserting after the definition of “rent” the following definition: ‘ “research and development” means any systematic, Finance 11 investigative and experimental study that involves novelty or technical risk carried out in the field of science or technology with the object of acquiring new knowledge or using the results of the study for the production or improvement of materials, devices, products, produce, or processes, but does not include — (a) quality control or routine testing of materials, devices or products; (b) research in the social sciences or the humanities; (c) routine data collection; (d) efficiency surveys or management studies; (e) market research or sales promotion; (f) routine modifications or changes to materials, devices, products, processes or production methods; or (g) cosmetic modifications or stylistic changes to materials, devices, products, processes or production methods;’. Amendment of section 4A 5. Section 4A of the principal Act is amended by substituting for paragraph (ii) the following paragraph: “(ii) amounts paid in consideration of any advice given, or assistance or services rendered in connection with the management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme; or”. 12 Laws of Malaysia ACT 812 Amendment of section 12 6. Section 12 of the principal Act is amended by inserting after subsection (2) the following subsections: “(3) Notwithstanding subsections (1) and (2), the income of a person from a business that is attributable to a place of business in Malaysia shall be deemed to be the gross income of that person derived from Malaysia from the business. (4) For the purpose of subsection (3), a place of business includes — (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a warehouse; (g) a building site, or a construction, an installation or an assembly project; (h) a farm or plantation; and (i) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources, and without prejudice to the generality of the foregoing, a person shall be deemed to have a place of business in Malaysia if that person— (i) carries on supervisory activities in connection with a building or work site, or a construction, an installation or an assembly project; or Finance 13 (ii) has another person acting on his behalf who — (A) habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification; (B) habitually maintains a stock of goods or merchandise in that place of business from which such person delivers goods or merchandise; or (C) regularly fills orders on his behalf.”. Amendment of section 15A 6A. Section 15A of the principal Act is amended by substituting for paragraph (b) the following paragraph: “(b) amounts paid in consideration of any advice given, or assistance or services rendered in connection with the management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme;”. Amendment of section 34 7. Subsection 34(7) of the principal Act is amended by substituting for the words “scientific research” the words “research and development”. Amendment of section 34A 8. Section 34A of the principal Act is amended — (a) in the shoulder note, by inserting after the word “research” the words “and development”; and 14 Laws of Malaysia ACT 812 (b) in subsections (1), (2) and (5), by inserting after the word “research” the words “and development”. Amendment of section 39 9. Subsection 39(1) of the principal Act is amended — (a) by deleting the word “or” at the end of paragraph (p); (b) by substituting for the full stop at the end of paragraph (q) the words “; or”; and (c) by inserting after paragraph (q) the following paragraph: “(r) subject to any rules as may be prescribed by the Minister, any amount in respect of a payment made by a person, who is a resident, to any Labuan company.”. Amendment of section 44 10. Section 44 of the principal Act is amended by inserting after subsection (5E) the following subsection: “(5F) Notwithstanding subsection (4) or (5), the amount ascertained under either of those subsections for any relevant year shall only be deductible in accordance with subsection 43(2) for a period of seven consecutive years of assessment and that period commences immediately following the relevant year of assessment and any amount or balance of the amount which is not deductible at the end of that period shall be disregarded for the purposes of this Act.”. Special provision relating to sections 43 and 44 11. Notwithstanding sections 43 and 44 of the principal Act — Finance 15 (a) any amount ascertained under subsection 44(4) or (5) of the principal Act for the year of assessment 2017 and the preceding years of assessment which has not been deducted pursuant to subsection 43(2) of the principal Act for the year of assessment 2018; or (b) any amount ascertained under subsection 44(4) or (5) of the principal Act for the year of assessment 2018, may be accounted for the purpose of deduction under subsection 43(2) of the principal Act for the year of assessment 2019 and subsequent years of assessment until the year of assessment 2028 and any amount which has not been deducted pursuant to subsection 43(2) of the principal Act after the end of the year of assessment 2028 shall be disregarded for the purposes of the principal Act. Amendment of section 44A 12. Section 44A of the principal Act is amended — (a) in subsection (1), by inserting after the word “may” the words “, for the basis period for three consecutive years of assessment,”; (b) by inserting after subsection (1) the following subsection: “(1A) For the purpose of sub