FINANCE ACT 1994

Finance LAWS OF MALAYSIA REPRINT Act 513 FINANCE ACT 1994 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 FINANCE ACT 1994 Date of Royal Assent ... ... ... 15 February 1994 Date of publication in the Gazette 24 February 1994 PREVIOUS R EPRINT First Reprint ... ... ... ... ... 2002 LAWS OF MALAYSIA Act 513 FINANCE ACT 1994 ARRANGEMENT OF SECTIONS C HAPTER I PRELIMINARY Section 1. Short title 2. Amendments of Acts C HAPTER 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 6 A 6. Amendment of section 34 7. Amendment of section 34 B 8. Amendment of section 44 9. Amendment of section 48 10. Amendment of section 49 11. Amendment of section 50 12. Amendment of section 60 D 13. Amendment of section 60E 14. Amendment of section 76 15. Amendment of section 108 16. Amendment of section 110 17. Amendment of section 112 18. Amendment of section 113 Laws of Malaysia ACT 513 Section 19. Amendment of section 114 20. Amendment of section 115 21. Amendment of section 116 22. Amendment of section 117 23. Amendment of section 118 24. Amendment of section 119 25. Amendment of section 120 26. Amendment of Schedule 1 27. Amendment of Schedule 3 28. Amendment of Schedule 6 29. Amendment of Schedule 7A C HAPTER III AMENDMENTS TO THE PETROLEUM (INCOME TAX) ACT 1967 30. Commencement of amendments to the Petroleum (Income Tax) Act 1967 31. Amendment of section 2 32. Amendment of section 4 33. Amendment of section 13 A 34. Amendment of section 23 35. New section 65B 36. Amendment of Schedule 2 C HAPTER IV AMENDMENTS TO THE STAMP ACT 1949 37. Commencement of amendments to the Stamp Act 1949 38. Amendment of section 2 39. Amendment of section 9 40. Amendment of section 80 41. Amendment of First Schedule 42. Amendment of Second Schedule 43. Amendment of Fifth Schedule Finance LAWS OF MALAYSIA Act 513 FINANCE ACT 1994 An Act to amend the Income Tax Act 1967, the Petroleum (Income Tax) Act 1967 and the Stamp Act 1949. [ ] 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: CHAPTER I PRELIMINARY Short title 1. This Act may be cited as the Finance Act 1994. Amendments of Acts 2. The Income Tax Act 1967 [Act 53], the Petroleum (Income Tax) Act 1967 [Act 45 of 67] and the Stamp Act 1949 [Act 378] are amended in the manner specified in Chapters II, III and IV respectively. CHAPTER II AMENDMENTS TO THE INCOME TAX ACT 1967 Commencement of amendments to the Income Tax Act 1967 3. (1) Except for sections 4, 7, paragraphs 8(d), 10(a), sections 11, 12, 13, 14, 17, 18, 19, 20, 21, 22, 23, 24, 25, paragraph 28(d) and section 29, this Chapter shall have effect for the year of assessment 1994 and subsequent years of assessment. Laws of Malaysia ACT 513 (2) Section 4, paragraph 10(a) and section 11 shall be deemed to have come into force on 1 June 1991. (3) Section 7, paragraph 8(d), sections 12, 14, and 29 shall come into force on 1 January 1994. (4) Section 13 shall be deemed to have come into force on 1 January 1993. (5) Paragraph 28(d) shall be deemed to have come into force on 16 February 1993. (6) Sections 17, 18, 19, 20, 21, 22, 23, 24 and 25 shall have effect upon the coming into force 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) in the definition of “approved scheme” by inserting after the word “means” the words “the Employees Provident Fund or”. Amendment of section 6A 5. Subsection 6A(2) of the principal Act is amended— (a) by substituting for the word “sixty” in paragraph (a) the word “ninety”; and (b) by substituting for the word “thirty” in paragraph (b) the word “fifty”. Amendment of section 34 6. Section 34 of the principal Act is amended— (a) in subsection (4), by substituting for the word “fifteen” in paragraph (a) the word “sixteen”; (b) in subsection (6)— (i) by deleting the word “and” at the end of paragraph (e); (ii) by substituting for the full stop at the end of paragraph (f) the punctuation mark and word “; and”; and Finance (iii) by inserting after paragraph (f) the following paragraph: “(g) an amount equal to the expenditure incurred by the relevant person in the relevant period on the provision of library facilities which are accessible to the public and in respect of contributions to public libraries and libraries of schools and institutions of higher education: Provided that the amount that may be deducted shall not exceed one hundred thousand ringgit.”. Amendment of section 34 B 7. Section 34 B of the principal Act is amended by substituting for the word “wholly” appearing in paragraphs (4)(a) and (4)(b) the word “mainly”. Amendment of section 44 8. Section 44 of the principal Act is amended— (a) in subsection (6), by substituting for the full stop a colon; (b) by inserting after subsection (6) the following proviso: “Provided that in respect of any gift of money made by him during the period from 1 November 1993 to 31 January 1994 to the Government low-cost housing fund managed by the Central Bank of Malaysia, there shall be given a further deduction of an amount equal to that gift of money.”; (c) in subsection (7), in the definition of “organization”, by substituting for the full stop at the end of paragraph (g) the punctuation mark and word “; or”; and (d) in subsection (7), in the definition of “organization”, by inserting after paragraph (g) the following paragraph: “(h) an organization established exclusively for the conservation or protection of the environment.”. Laws of Malaysia ACT 513 Amendment of section 48 9. Section 48 of the principal Act is amended by substituting for subsection (3) the following subsection: “(3) Where for a year of assessment any individual is entitled under paragraph (1)(b) or (c) to a deduction (in this subsection referred to as the ordinary deduction)— (a) in respect of a child who at any time in the basis year for that year of assessment is over the age of eighteen years and— (i) is receiving full-time instruction at a university, college or other establishment (similar to a university or college) of higher education; or (ii) is serving under articles or indentures with a view to qualifying in a trade or profession, (in this subsection referred to as receiving further education) then, if that individual satisfies the Director General that he has directly expended in that basis year a sum or sums exceeding the ordinary deduction on the maintenance of that child or in making (in connection with that child’s further education) any payment to which paragraph (1)(b) or (c) applies, there shall be allowed in respect of that child, in substitution for the ordinary deduction, a deduction equal to the total sum or sums so expended but not exceeding four times the amount of the ordinary deduction in respect of a child receiving further education in Malaysia and not exceeding twice the amount of the ordinary deduction in respect of a child receiving further education outside Malaysia: Provided that in respect of a child who commenced receiving further education in a place outside Malaysia in the basis year for the year of assessment 1994, or in the basis year for any prior year of assessment, there shall be allowed in substitution for the ordinary deduction, a deduction equal to the total sum or sums so expended but not exceeding four times the amount of the ordinary deduction; Finance (b) where that individual is resident in East Malaysia for that basis year, in respect of a child who for the whole or part of that basis year is receiving full-time instruction at a school or other educational institution in *Peninsular Malaysia and who commenced receiving such instruction in the basis year for the year of assessment 1994 or in the basis year for any prior year of assessment, then that individual shall be entitled to, in substitution for the ordinary deduction, the deduction in respect of a child receiving further education in Malaysia referred to in paragraph (a).”. Amendment of section 49 10. Section 49 of the principal Act is amended— (a) in paragraph (1)(b), by substituting for the words “Employees Provident Fund Ordinance 1951” the words “Employees Provident Fund Act 1991”; (b) in subsection (1), by substituting for the words “three thousand five hundred” the words “five thousand”; (c) in subsection (1A), by substituting for the words “three thousand five hundred” wherever appearing therein the words “five thousand”; and (d) by substituting for the marginal reference “F.M. 21/1951.” the marginal reference “Act 452.”. Amendment of section 50 11. Section 50 of the principal Act is amended— (a) in paragraph (3)(c), by substituting for the words “Employees Provident Fund Ordinance 1951” the words “Employees Provident Fund Act 1991”; and (b) by substituting for the marginal reference “F.M. 21/1951.” the marginal reference “Act 452.”. Amendment of section 60 D 12. Section 60 D of the principal Act is amended in subsection (5), in the definition of “venture capital company”, by substituting for paragraph (b) the following paragraph: “(b) is engaged wholly in the making of investments and, throughout the basis period for a year of assessment, not less than seventy per cent of the total funds invested Laws of Malaysia ACT 513 consist of the holding of shares in a venture company, the shares in which are not listed for quotation in the official list of a stock exchange in Malaysia at the time of acquisition of such shares by that venture capital company; and”. Amendment of section 60 E 13. Subsection 60E (7) of the principal Act is amended— (a) in the definition of “approved operational headquarters company”, by substituting for the comma in paragraph (c) a semicolon; (b) in the definition of “approved operational headquarters company”, by deleting the words “but does not include a company which carries on a finance business or which provides professional services;”; and (c) in the definition of “qualifying services”, by substituting for paragraph (b) the following paragraph: “(b) provision of treasury and fund management services to its offices outside Malaysia or its related companies outside Malaysia and, where such services include the provision of credit facilities, where the funds for providing such facilities are obtained from outside Malaysia; and”. Amendment of section 76 14. Section 76 of the principal Act is amended— (a) by substituting for the full stop at the end of subsection (1) a colon; and (b) by inserting after subsection (1) the following proviso: “Provided that where no such nomination has been made by a Ruler or Ruling Chief, section 66 shall apply to such Ruler or Ruling Chief.”. Finance Amendment of section 108 15. Section 108 of the principal Act is amended— (a) by inserting after subsection (2B) the following subsection: “(2 C) Notwithstanding any other provision of this Act, where a dividend is paid, credited or distributed with or without deduction of tax during the basis year for the year of assessment 1994, the amount of the dividend received by the shareholder shall be deemed to be a dividend of such a gross amount as after deduction of tax at the rate of thirty-two per cent would be equal to— (a) the amount in fact paid or credited; or (b) where the dividend consists of property other than money, the amount of the market value of that property at the time of the dividend’s distribution, and a sum equal to the difference between that gross amount and the amount mentioned in parag