FINANCE (NO. 2) ACT 1982

Finance (No. 2) LAWS OF MALAYSIA REPRINT Act 274 FINANCE (NO. 2) 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 1 2 ACT 274 Laws of Malaysia FINANCE (NO. 2) ACT 1982 Date of Royal Assent ... ... ... … … 30 December 1982 Date of publication in the Gazette … ... 31 December 1982 PREVIOUS REPRINT First Reprint ... ... ... ... ... 2001 Finance (No. 2) LAWS OF MALAYSIA Act 274 FINANCE (NO. 2) ACT 1982 ARRANGEMENT OF SECTIONS C HAPTER I PRELIMINARY Section 1. Short title and commencement 2. Amendment of Acts and Ordinances CHAPTER II AMENDMENTS TO THE INCOME TAX ACT 1967 3. Commencement of amendments to the Income Tax Act 1967 4. Amendment of section 34 5. New section 34A 6. Amendment of section 35 7. Amendment of section 39 8. Amendment of section 67 9. Amendment of section 103 10. Amendment of section 104 11. New section 107A 12. Amendment of section 127 13. Amendment of section 128 14. Amendment of Schedule 3 15. Amendment of Schedule 6 16. Amendment of Schedule 7A 3 4 Laws of Malaysia ACT 274 CHAPTER III AMENDMENTS TO THE PETROLEUM (INCOME TAX) ACT 1967 Section 17. Commencement of amendments to the Petroleum (Income Tax) Act 1967 18. Amendment of section 18 19. Amendment of section 65 A CHAPTER IV AMENDMENTS TO THE STAMP ORDINANCE 1949 20. Commencement of amendments to the Stamp Ordinance 1949 21. Amendment of section 16 22. New section 20A 23. Amendment of First Schedule 24. Amendment of Second Schedule 25. Amendment of Third Schedule CHAPTER V AMENDMENTS TO THE STAMP ORDINANCE (SABAH) 26. Commencement of amendments to the Stamp Ordinance (Sabah) 27. New section 5 A 28. Amendment of section 16 29. New section 20A 30. Amendment of First Schedule 31. Amendment of Second Schedule 32. Amendment of Third Schedule CHAPTER VI AMENDMENTS TO THE STAMP ORDINANCE (SARAWAK) 33. Commencement of amendments to the Stamp Ordinance (Sarawak) Finance (No. 2) Section 34. New sections 3A and 3B 35. Amendment of First Schedule 36. Amendment of Second Schedule CHAPTER VII AMENDMENTS TO THE SALES TAX ACT 1972 37. Commencement of amendment to the Sales Tax Act 1972 38. Amendment of section 31 39. New section 31A 5 6 Laws of Malaysia ACT 274 7 Finance (No. 2) LAWS OF MALAYSIA Act 274 FINANCE (NO. 2) ACT 1982 An Act to amend the Income Tax Act 1967 [Act 53], the *Petroleum (Income Tax) Act 1967 [Act 45 of 1967], the **Stamp Ordinance 1949 [Ord. No. 59 of 1949], the Stamp Ordinance (Sabah) [Cap. 137], the Stamp Ordinance (Sarawak) [Cap. 32] and the Sales Tax Act 1972 [Act 64] 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 (No. 2) Act 1982 and shall have effect or be deemed to have effect as provided in this Act. Amendment of Acts and Ordinances 2. The Income Tax Act 1967, the Petroleum (Income Tax) Act 1967, the **Stamp Ordinance 1949, the Stamp Ordinance (Sabah), the Stamp Ordinance (Sarawak) and the Sales Tax Act 1972 are amended respectively in the manner specified in Chapters II, III, IV, V, VI and VII respectively. *NOTE—The Petroleum (Income Tax) Act 1967 [Act 45 of 1967] has been revised to become the Petroleum (Income Tax) Act 1967 [Act 543] **The Stamp Ordinance 1949 [Ord. No. 59 of 1949] has been revised to become the Stamp Act 1949 [Act 378]. 8 Laws of Malaysia ACT 274 CHAPTER II AMENDMENTS TO THE INCOME TAX ACT 1967 Commencement of amendments to the Income Tax Act 1967 3. (1) Except for sections 4, 5, 6, 7, 8, 9, 10, 11, 12, 14 and paragraph 15(a), the provisions of this Chapter shall have effect for the year of assessment 1983 and subsequent years of assessment. (2) Sections 4, 5, 6 and 14 shall have effect for the year of assessment 1984 and subsequent years of assessment. (3) Sections 7, 8, 9, 10, 11 and 12 shall come into force on 1 January 1983. (4) Paragraph 15(a) shall have effect on those cases whose approval for retirement is given on or after 22 October 1982. Amendment of section 34 4. Section 34 of the Income Tax Act 1967, which in this Chapter is referred to as “the principal Act”, is amended by deleting subsection (7). New section 34A 5. The principal Act is amended by inserting immediately after section 34 the following new section 34A: “Special deduction for research expenditure approved by Minister 34A. (1) In ascertaining the adjusted income of a person from a business for the basis period for a year of assessment, deductions shall be made from the gross income from the business for that period in respect of expenditure, not being capital expenditure incurred on plant, machinery, fixtures, land, premises, buildings, structures or works of a permanent nature or on alterations, additions or extensions thereof or in the acquisition of any rights in or over any property, incurred by that person during that period on research approved by the Minister. Finance (No. 2) 9 (2) The Minister in approving the research shall allow a further deduction of one third of the amount of expenditure on research in addition to the deduction under subsection (1) and may impose such conditions as he thinks fit or may specify the period for the purpose of deduction under this section. (3) Where any deduction in respect of expenditure on research is made under this section, no deduction in respect of that expenditure shall be made under section 33 or 34.”. Amendment of section 35 6. Section 35 of the principal Act is amended by substituting for the words “and 34” in subsection (2) the words “, 34 and 34A”. Amendment of section 39 7. Subsection 39(1) of the principal Act is amended— (a) by deleting the word “or” appearing at the end of paragraph (g); (b) by substituting for the full stop at the end of paragraph (h) a semi-colon and the word “or”; and (c) by inserting immediately after paragraph (h) the following new paragraph (i): “(i) any contract payment from which tax is deductible under section 107A, if tax has not been deducted therefrom and paid to the Director General in accordance with subsection (1) of that section.”. Amendment of section 67 8. Section 67 of the principal Act is amended by inserting immediately before the figures “108” in subsection (4) the figures “107A,”. Amendment of section 103 9. Section 103 of the principal Act is amended by inserting immediately before the figures “108(5)” in subsection (7) the words “107 A(2) or”. 10 Laws of Malaysia ACT 274 Amendment of section 104 10. Subsection 104(1) of the principal Act is amended by inserting immediately before the figures “109(2)” in paragraph (c) the words “107 A(2) or”. New section 107A 11. The principal Act is amended by inserting immediately after section 107 the following new section 107A: “Deduction of tax from contract payment 107A. (1) Where any person (in this section referred to as “the payer”) is liable to make contract payment to a non-resident contractor in respect of services under a contract, he shall upon paying or crediting such contract payment deduct therefrom tax at the rate of— (a) fifteen per cent of the contract payment on account of tax which is or may be payable by that non-resident contractor for any year of assessment; and (b) five per cent of the contract payment on account of tax which is or may be payable by employees of that non-resident contractor for any year of assessment, and (whether or not that tax is so deducted) shall within one month after paying or crediting such contract payment render an account and pay the amount of that tax to the Director General: Provided that the Director General may— (i) give notice in writing to the payer requiring him to deduct and pay tax at some other rates or to pay or credit the contract payment without deduction of tax; or (ii) under special circumstances, allow extension of time for tax deducted to be paid over. (2) Where the payer fails to pay any amount due from him under subsection (1), the amount which he fails to pay shall be a debt due from him to the Government and shall be payable forthwith to the Director General. Finance (No. 2) 11 (3) Where in pursuance of this section any amount is paid to the Director General by the payer or recovered by the Director General from the payer— (a) the Director General shall apply the amount paid or recovered under paragraph (1)(a) towards payment of the tax payable for any year of assessment by the non-resident contractor to whom the payer was liable to pay the contract payment to which that amount relates; (b) the Director General shall refund the amount paid or recovered under paragraph (1)(b) to the non-resident contractor to whom the payer was liable to pay the contract payment to which that amount relates as and when the Director General deems appropriate; and (c) if the payer has not deducted any amount in paying the contract payment with respect to which the amount relates, he may recover the amount from the non-resident contractor as a debt due to the payer. (4) In relation to any case, nothing in paragraph (1)(b) shall prevent the deduction of any tax (not being tax deducted in accordance with this subsection) in accordance with section 107. (5) In this section— “contract payment” means any payment, not being a payment that is a royalty within the meaning of subsection 2(1) made for services under a contract to the non-resident contractor or his agent or any other person acting on his behalf; “contract project”, in relation to any non-resident contractor, includes any undertaking, project or scheme, being an undertaking, project or scheme carried on, carried out or performed in Malaysia; “non-resident contractor” means any person who is not resident in Malaysia within the meaning of section 7 or 8 and who, under a contract or a subsidiary contract (not being a contract of service or apprenticeship) or an agreement or arrangement undertakes (otherwise than as an employee) any services under a contract; “person” includes a partnership; “professional service”, in relation to any non-resident contractor, includes any advisory, consultancy, technical, industrial, commercial or scientific service; 12 Laws of Malaysia ACT 274 “services under a contract” in relation to any non-resident contractor, means— (a) the performing or rendering of any work or professional service in Malaysia, being work or professional service in connection with, or in relation to, any contract project; or (b) the granting, providing or supplying of the use, or the right to use, in Malaysia (whether or not in connection with or in relation to any contract project), any personal property or any services of any person being a person other than the non-resident contractor.”. Amendment of section 127 12. Section 127 of the principal Act is amended by inserting immediately before the figures “108” appearing twice in subsection (5) the figures “107A,”. Amendment of section 128 13. Section 128 of the principal Act is amended by inserting immediately before the words “or as a result of taking up a new employment” in paragraph (1)(b) the words “or as a result of being transferred by his employer temporarily outside Malaysia”. Amendment of Schedule 3 14. Schedule 3 to the principal Act is amended by inserting immediately after paragraph 37A the following new paragraph 37B: “Qualifying expenditure: Building used for research 37B. The provisions of this Schedule relating to industrial building shall apply, mutatis mutandis, to a building or part thereof being in use for the purpose of research approved by the Minister within t