FINANCE ACT 1982

LAWS OF MALAYSIA REPRINT Act 264 FINANCE ACT 1982 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 2 Laws of Malaysia ACT 264 FINANCE ACT 1982 Date of Royal Assent … … … … ... 23 January 1982 Date of publication in the Gazette … … … 28 January 1982 PREVIOUS REPRINT First Reprint … … … … … 2001 Finance 3 LAWS OF MALAYSIA Act 264 FINANCE ACT 1953 ARRANGEMENT OF SECTIONS CHAPTER I PRELIMINARY Section 1. Short title and commencement 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 6B 5. Amendment of section 54 6. Amendment of section 54A 7. New section 54B 8. Amendment of section 60 9. New section 60B and renumbering of section 60B as section 60C 10. Amendment of section 103 11. Amendment of Schedule 1 12. Amendment of Schedule 6 CHAPTER III AMENDMENTS TO THE REAL PROPERTY GAINS TAX ACT 1976 13. Commencement of amendments to the Real Property Gains Tax Act 1976 4 Laws of Malaysia Section 14. Amendment of Schedule 2 15. Amendment of Schedule 5 ACT 264 Finance 5 LAWS OF MALAYSIA Act 264 FINANCE ACT 1982 An Act to amend the Income Tax Act 1967 and the Real Property Gains Tax Act 1976 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 1982 and shall have effect or be deemed to have effect as provided in this Act. Amendment of Acts 2. The Income Tax Act 1967 [Act 53] and the Real Property Gains Tax Act 1976 [Act 169] are amended respectively in the manner specified in Chapters II and III. C HAPTER II AMENDMENTS TO THE INCOME TAX ACT 1967 Commencement of amendments to the Income Tax Act 1967 3. (1) Except for section 10, the provisions of this Chapter shall have effect for the year of assessment 1982 and subsequent years of assessment. (2) Section 10 shall be deemed to have come into force on 1 January 1982. 6 Laws of Malaysia ACT 264 Amendment of section 6B 4. Section 6B of the Income Tax Act 1967 [Act 53], which in this Chapter is referred to as “the principal Act”, is amended by deleting the words “calculated on term loan basis” appearing in subsection (1). Amendment of section 54 5. Section 54 of the principal Act is amended by inserting immediately after the words “Subject to section 54A” appearing in paragraph (2)(a) the words “or section 54B”. Amendment of section 54A 6. Section 54A of the principal Act is amended— (a) by substituting for the words “for a period of twelve years of assessment” appearing in paragraph (1)(a) the words “for twelve years of assessment (hereinafter referred to as the exemption period) commencing from the year of assessment 1982 or in the case of a company whose first basis period ends after 31 December 1981”; (b) by substituting for the word “ten” appearing in paragraph (2)(a) the word “fifteen”; (c) by substituting for paragraphs (2)(c) and (d) the following new paragraphs (c) and (d): “(c) during every four consecutive basis periods for the exempt years of assessment (hereinafter referred to as the relevant period) the company shall undertake a programme to increase the tonnage of its fleet of ships or vessels and shall for this purpose incur capital expenditure on the acquisition of ships or vessels which shall not be less than seventyfive per cent of such fleet acquisition reserve as at the end of the relevant period: Provided that if at the end of the twelve year period where a person has incurred capital expenditure on the acquisition of ships or vessels of not less than seventy-five per cent of the total fleet acquisition reserve, he shall be entitled to the full exemption specified in paragraph (1)(a); and Finance 7 (d) where at any time during a relevant period any of the conditions have not been complied with or where the Director General is of the opinion that any expenditure deemed to have been incurred has not in fact been incurred, this section shall be deemed never to have had effect for that relevant period.”; and (d) by adding immediately after subsection (2) the following new subsection (3): “(3) For the purposes of this section, capital expenditure is deemed to have been incurred— (i) when expenditure is made; (ii) on the signing of a contract for the purchase of a ship or vessel; or (iii) when a similar commitment is undertaken and it is proved to the satisfaction of the Director General that such commitment is for the actual purchase of a ship or vessel.”. New section 54B 7. The principal Act is amended by inserting immediately after section 54A the following new section 54B: “Abatement of chargeable income of resident companies carrying on sea transport undertakings 54 B . (1) (a) Subject to the conditions referred to in subsection (2), a company shall have its chargeable income in respect of a business of transporting passengers or cargo by sea to which paragraph 54(2)(a) applies (hereinafter referred to as that business) abated by fifty per cent for twelve years of assessment (hereinafter referred to as that period) commencing from the year of assessment immediately following the expiration of its exemption period under section 54A; and (b) as soon as any amount of the chargeable income of that business has been abated, it shall be credited to an account (that account being referred to as the exempt account) and paragraph 5 (except sub-paragraph (1) thereof) and paragraph 6 of Schedule 7A shall apply as if any reference in those 8 Laws of Malaysia ACT 264 paragraphs to any income exempted or which has become exempt under paragraph 3 were a reference to income credited to the exempt account. (2) (a) The total dividend (including any dividend paid out of the exempt account) paid, credited or distributed in a basis period shall not exceed fifteen per cent of the paid up capital as at the first day of such basis period; (b) any excess of the audited net profit for the basis period over such dividend less any tax payable for that year of assessment shall be credited to a fleet acquisition reserve which shall not be reduced other than for the purposes of paragraph (c); (c) during that period the company shall undertake a programme to increase the tonnage of its fleet of ships or vessels and shall for this purpose incur capital expenditure on the acquisition of ships or vessels which at the end of every four consecutive basis periods (hereinafter referred to as the relevant period) shall not be less than seventy-five per cent of such fleet acquisition reserve; and (d) where at any time during a basis period any of the conditions have not been complied with or where the Director General is of the opinion that any expenditure deemed to have been incurred has not in fact been incurred, this section shall be deemed never to have had effect for that relevant period. (3) For the purposes of this section, capital expenditure is deemed to have been incurred— (i) when expenditure is made; (ii) on the signing of a contract for the purchase of a ship or vessel; or (iii) when a similar commitment is undertaken and it is proved to the satisfaction of the Director General that such commitment is for the actual purchase of a ship or vessel.”. Amendment of section 60 8. Section 60 of the principal Act is amended— (a) by substituting for subsection (2) the following new subsection (2): Finance 9 “(2) For the purposes of this section— (a) subject to paragraph (b), where an insurer carries on life business in conjunction with general business, the life business and the general business shall be treated as separate insurance businesses; (b) (i) where an insurer carries on inward reinsurance business, the inward re-insurance business and the general business (excluding the inward re-insurance business and offshore insurance business) shall be treated as separate general businesses; (ii) where an insurer carries on offshore insurance business, the offshore insurance business and the general business (excluding the offshore insurance business and inward re-insurance business) shall be treated as separate general businesses.”; (b) by inserting immediately after subsection (5A) the following new subsection (5B): “(5B ) The adjusted income for the basis period for a year of assessment from the offshore insurance business of an insurer resident for that basis year for that year of assessment shall consist of an amount arrived at by applying subsection (5) as if references therein to “general business” and “general policies ”were references to “offshore insurance business” and “offshore insurance policies” respectively.”; (c) by inserting immediately after subsection (6A) the following new subsection (6B): “(6B ) The adjusted income for the basis period for a year of assessment from the off-shore insurance business of an insurer not resident for the basis year for that year of assessment shall, where that business is wholly or partly carried on in Malaysia, consist of an amount arrived at by applying subsection (6) as if references therein to “general business” and “Malaysian general policies” were references to “offshore insurance business” and “offshore insurance policies” respectively.”; 10 Laws of Malaysia ACT 264 (d) by substituting for the words “or (6A)” appearing in the proviso to subsection (7) the words “, (6A) or (6B)”; (e) by substituting for the words “and in section 60A” appearing in subsection (11) the words “, section 60 A and section 60B”; and (f) by substituting for the full stop at the end of the definition of “Malaysian general policy” and “Malaysian life policy” in subsection (11) a semicolon and by adding immediately thereafter the following new definitions: “ “offshore insurance ” means insurance of a risk under a general policy where the risk is outside Malaysia and the policy of insurance is issued by an insurer resident in Malaysia or by a branch in Malaysia of an insurer not resident in Malaysia, and where any risk is in transit in Malaysia it shall be deemed to be outside Malaysia; “offshore insurance policies ” means policies issued in respect of offshore insurance.”. New section 60B and renumbering of section 60B as section 60 C 9. The principal Act is amended— (a) by inserting immediately after section 60A the following new section 60B: “Offshore insurance: chargeable income, reduced rate and exempt dividend 60B. (1) (a) Where an insurer carries on offshore insurance business in conjunction with other insurance businesses, the part of the chargeable income for a year of assessment which is attributable to that offshore insurance business shall consist of an amount which bears the same proportion to the chargeable income for that year of assessment of the insurer as the part of the aggregate income which relates to the offshore insurance business bears to the whole of the aggregate income for that year of assessment from all sources of the insurer; and Finance 11 (b) the amount arrived at under paragraph (a) shall be treated as the chargeable income for a year of assessment of an insurer from offshore insurance business for the purposes of paragraph 3 of Part I of Schedule 1. (2) As soon as any amount of chargeable income from the offshore insurance business of an insurer (being a company) resident for the basis year for a year of assessment has been subject to income tax at the rate of five per cent— (a) the net amount of that income (after deduction of such tax) shall be credited to an account (that account and company being referred to as the exempt account and the relevant co