FINANCE ACT 2006

Finance LAWS OF MALAYSIA REPRINT Act 661 Finance act 2006 As at 1 November 2012 PUBLISHED BY THE COMMISSIONER OF LAW REVISION, MALAYSIA UNDER THE AUTHORITY OF THE REVISION OF LAWS ACT 1968 2012 1 Act 661 2 Laws of Malaysia Date of Royal Assent … … … 29 December 2006 Date of publication in the Gazette … … … 31 December 2006 Finance LAWS OF MALAYSIA Act 661 FINANCE ACT 2006 ARRANGEMENT OF SECTIONS Chapter I PRELIMINARY Section 1. 2. Short title Amendment of Acts Chapter II AMENDMENTS TO THE INCOME TAX ACT 1967 3. Commencement of amendments to the Income Tax Act 1967 5. Amendment of section 6 4. 6. 7. 8. 9. 10. 11. 12. 13. 14. Amendment of section 2 Amendment of section 6a Deletion of section 6b Amendment of section 13 Amendment of section 22 Amendment of section 30 Amendment of section 34 Amendment of section 35 Amendment of section 39 Amendment of section 43 15. Amendment of section 44 17. Amendment of section 46 16. 18. Amendment of section 44a Amendment of section 60f 3 4 Laws of Malaysia Section 19. Amendment of section 61a 21. Amendment of section 107a 20. 22. 23. 24. Amendment of section 91 Amendment of section 109 Amendment of section 109b Amendment of section 109d 25. Amendment of section 111 27. Special provision relating to section 138a 26. 28. 29. 30. 31. 32. 33. 34. Act 661 New Chapter 1a Amendment of section 153 Amendment of section 154 Amendment of Schedule 1 Amendment of Schedule 3 Amendment of Schedule 6 Amendment of Schedule 7 Amendment of Schedule 7a Chapter III AMENDMENTS TO THE REAL PROPERTY GAINS TAX ACT 1976 35. 36. 37. 38. Commencement of amendments to the Real Property Gains Tax Act 1976 Amendment of section 9 Amendment of section 15 Amendment of Schedule 2 Chapter IV AMENDMENTS TO THE STAMP ACT 1949 39. Commencement of amendments to the Stamp Act 1949 40. Amendment of section 2 42. Amendment of section 7 41. Amendment of section 5a Finance Section 43. Amendment of section 9 45. Amendment of section 80 44. 46. 5 Amendment of section 57 Amendment of First Schedule Chapter V AMENDMENTS TO THE PETROLEUM (INcOME TAX) AcT 1967 47. 48. 49. Commencement of amendments to the Petroleum (Income Tax) Act 1967 Amendment of section 16 Amendment of section 22 Chapter VI Amendments to the Sales Tax Act 1972 50. Amendment of section 31c Chapter VII AMENDMENTS TO THE SERVICE TAX ACT 1975 51. Amendment of section 21b 6 Laws of Malaysia Act 661 7 Finance LAWS OF MALAYSIA Act 661 FINANCE ACT 2006 An Act to amend the Income Tax Act 1967, the Real Property Gains Tax Act 1976, the Stamp Act 1949, the Petroleum (Income Tax) Act 1967, the Sales Tax Act 1972 and the Service Tax Act 1975. [As provided in this Act] ENACTED by the Parliament of Malaysia as follows: Chapter I PRELIMINARY Short title 1. This Act may be cited as the Finance Act 2006. Amendment of Acts 2. The Income Tax Act 1967 [Act 53], the Real Property Gains Tax Act 1976 [Act 169], the Stamp Act 1949 [Act 378], the Petroleum (Income Tax) Act 1967 [Act 543], the Sales Tax Act 1972 [Act 64] and the Service Tax Act 1975 [Act 151] are amended in the manner specified in Chapters II, III, IV, V, VI and VII respectively. Chapter II AMENDMENTS TO THE INCOME TAX ACT 1967 Commencement of amendments to the Income Tax Act 1967 3. (1) Sections 4, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 19, 25, paragraph 30(a), section 31, paragraphs 32(a), (b), (c) and (e) and section 33 have effect for the year of assessment 2007 and subsequent years of assessment. 8 Laws of Malaysia Act 661 (2) Section 5, paragraph 24(a), sections 26, 27, 28, 29 and paragraph 30(b) come into operation on 1 January 2007. (3) Section 18 has effect for the year of assessment 2006 and subsequent years of assessment. (4) Section 20 comes into operation on the coming into operation of this Act. (5) Sections 21, 22, 23, paragraph 24(b), paragraph 32(d) and section 34 are deemed to have come into operation on 2 September 2006. Amendment of section 2 4. The Income Tax Act 1967, which is referred to as the “principal Act” in this Chapter, is amended in section 2— (a) in subsection (1)— (i) in the definition of “partnership”, by inserting after the words “in a partnership” the words “and any association which is established pursuant to a scheme of financing in accordance with the principles of Syariah”; and (ii) in the definition of “public entertainer”, by substituting for the word “athlete” the word “sportsperson”; and (b) in subsection (8), by substituting for the words “or the Securities Commission” the words “, the Securities Commission or the Labuan Offshore Financial Services Authority”. Amendment of section 6 5. Subsection 6(1) of the principal Act is amended by substituting for paragraph (i) the following paragraph: “(i) subject to section 109d but notwithstanding any other provisions of this Act, income tax shall be charged for each year of assessment upon the income of a unit Finance 9 holder other than a unit holder which is a resident company which consists of income distributed by the unit trust referred to in section 61a at the appropriate rate as specified under Part X of Schedule 1 provided that the rates specified under such Part shall apply only for a period of five years commencing from the year of assessment 2007.”. Amendment of section 6a 6. Section 6a of the principal Act is amended— (a) in subsections (1) and (4), by substituting for the words “, (3) and (3a)” the words “and (3)”; and (b) by deleting subsection (3a). Deletion of section 6b 7. The principal Act is amended by deleting section 6b. Amendment of section 13 8. Subsubparagraph 13(1)(b)(ii)(A) of the principal Act is amended by inserting after the words “leave passages” the words “including meals and accommodation”. Amendment of section 22 9. Subsection 22(2) of the principal Act is amended— (a) in subparagraph (a)(ii), by inserting after the semicolon the word “and”; (b) by substituting for the words “; and” at the end of paragraph (b) a full stop; and (c) by deleting paragraph (c). 10 Laws of Malaysia Act 661 Amendment of section 30 10. Subsection 30(4) of the principal Act is amended— (a) by substituting for the word “and” at the end of paragraph (a) the word “or”; (b) by substituting for paragraph (b) the following paragraph: “(b) any allowance or aggregate amount of allowances has been made under section 42 in computing the statutory income of the relevant person from a business for the basis period for a year of assessment (that basis period being prior to the relevant period) in respect of any expenditure incurred under Schedule 3,”; and (c) by inserting before the words “the amount released” the words “and the whole or any part of a debt in respect of any such outgoing, expense, sum, rent or expenditure is released in the relevant period,”. Amendment of section 34 11. Subsection 34(6) of the principal Act is amended by substituting for paragraph (k) the following paragraph: “(k) an amount equal to the expenditure incurred by the relevant person in the relevant period for sponsoring any arts, cultural or heritage activity approved by the Ministry of Culture, Arts and Heritage: Provided that the amount deducted in respect of expenditure incurred for sponsoring those activities shall not in aggregate exceed five hundred thousand ringgit of which the amount deducted in respect of expenditure incurred in sponsoring foreign arts, cultural or heritage activity shall not exceed two hundred thousand ringgit;”. Amendment of section 35 12. Subsection 35(2) of the principal Act is amended by substituting for the words “sections 33, 34, 34a and 34b” the words “this Act”. Finance 11 Amendment of section 39 13. Subsection 39(1) of the principal Act is amended— (a) by inserting after subparagraph (l)(vii) the following subparagraph: “(viii) the provision of a benefit or amenity to an employee consisting of a leave passage to facilitate a yearly event within Malaysia which involves the employer, the employee and the immediate family members of that employee; or”; and (b) in paragraph (m), by inserting after the words “(l)(i)” the words “and subject to subparagraph (l)(viii)”. Amendment of section 43 14. Section 43 of the principal Act is amended by deleting subsection (5). Amendment of section 44 15. Section 44 of the principal Act is amended— (a) in paragraph (1)(d), by substituting for the words “or (11a)” the words “, (11a), (11b) or (11c)”; (a) in the proviso to subsection (6), by substituting for the word “five” the word “seven”; (c) by substituting for subsection (11 a ) the following subsection: “(11 a ) There shall be deducted pursuant to this subsection from the aggregate income of a person other than an offshore company and individual for the relevant year reduced by any deduction for that year in accordance with subsection (1) an amount equal to the payment of zakat perniagaan which is paid in the basis period for that relevant year to an appropriate religious authority established under any written law or any person authorized by such religious authority: 12 Laws of Malaysia Act 661 Provided that the amount to be deducted pursuant to this subsection shall not exceed one-fortieth of the aggregate income of that person in the relevant year.”; and (d) by inserting after subsection (11 a ) the following subsections: “(11b) There shall be deducted from the aggregate income of a relevant person for the relevant year reduced by any deduction for that year in accordance with subsection (1) an amount equal to any gift of money or cost of contribution in kind made by the relevant person in the basis period for that year for any sports activity approved by the Minister or to any sports body approved by the Commissioner of Sports appointed under the Sports Development Act 1997 [Act 576]: Provided that the amount to be deducted pursuant to this subsection shall not exceed the difference between the amount of seven per cent of the aggregate income of the relevant person and the total amount that has been deducted pursuant to the proviso to subsection (6) and subsection (11c). (11c) There shall be deducted from the aggregate income of a relevant person for the relevant year reduced by any deduction for that year in accordance with subsection (1) an amount equal to any gift of money or cost of contribution in kind made by the relevant person in the basis period for that year for any project of national interest approved by the Minister: Provided that the amount to be deducted pursuant to this subsection shall not exceed the difference between the amount of seven per cent of the aggregate income of the relevant person and the total amount that has been deducted pursuant to the proviso to subsection (6) and subsection (11b).”. Finance 13 Amendment of section 44a 16. Subsection 44 a (9) of the principal Act is amended by substituting for paragraph (b) the following paragraph: “(b) the surrendering company gives an incorrect information in the return furnished under section 77a in respect of the amount of adjusted loss surrendered, the Director General may, by a notice in writing, require the surrendering company to pay a penalty equal to the amount of tax which had or would have been undercharged by the claimant company in consequence of the incorrect information and where the surrendering company is dissatisfied with the penalty, the surrendering company may within thirty days of being notified appeal to the Special Commissioners as if the notice were a notice of assessment and the provision of this Act relating to appeals shall apply accordingly with any necessary modifications.”. Amendment of section 46 17. Section 46 of the principal Act is amended— (a) in subsection (1)— (i) in paragraph (f), by inserting after the word “accounting” the words “, Islamic financing”; (ii) by deleting the word “and” at the end of paragraph (h); (iii) in paragraph (i)— (A)