WM laws of MALAYSIA Act REPRINTING 624 FINANCE ACT (No. 2) Order 2002 Contains all amendments to 1 January 2006 PUBLISHED by the COMMISSIONER of law revision, UNDER the AUTHORITY of law REVISION ACT 1968 in COLLABORATION with PERCETAKAN NASIONAL MALAYSIA BHD 2006 laws of Malaysia ACT 6242 FINANCE ACT (No. 2) Order 2002 date of Assent.................. 20 December 2002 date of publication in the Gazette............ 26 December 2002 REPRINTING BEFORE Reprinting The first ... ... more 2004 Finance (No. 2) 3 laws of MALAYSIA Act 624 FINANCE ACT (No. 2) Order 2002 ARRANGEMENT of SECTIONS CHAPTER I preliminary section 1. Short title 2. Amendment Act CHAPTER II AMENDMENTS to the INCOME TAX ACT 1967 3. Commencement amendments to the income tax Act 1967 4. Amendment of section 6 5. Amendment of section 7 6. Deletion of section 11 7. Amendment of section 15A 8. Amendment of section 18 9. Deletion of section 31 10. Deletion of section 37 11. Amendment of section 38 12. Amendment of section 60 13. The cut section 60E 14. Amendment of section 75 15. New section 75A of the 16. Amendment of section 82 17. New section 82A laws of Malaysia ACT 6244 section 18. Amendment of section 107A 19. Amendment of section 108 20. Amendment of section 111 21. Deletion of section 128 22. Amendment of section 131 23. Amendment of Schedule 1 24. Amendment of Schedule 3 25. Amendment of Schedule 4 26. Amendment of schedule 4A 27. Amendment of Schedule 4 c 28. Amendment of Schedule 6 29. Amendment of schedule 7A CHAPTER III AMENDMENTS to the INCOME TAX ACT (Amendment) Act 2002 30. Commencement amendments to the income tax Act (Amendment) Act 2002 31. Amendment of section 30 32. Amendment of section 31 of CHAPTER IV AMENDMENTS to the STAMP ACT 1949 33. Commencement amendment to the stamp Act 1949 34. Amendment of section 9 35. Amendment of section 47A 36. Amendment of first schedule chapter V AMENDMENTS to the TAX ACT LABUAN OFFSHORE BUSINESS ACTIVITY 1990 37. Commencement of activity Tax Act amendments to the Labuan Offshore business 1990 38. Amendment of section 2 39. Amendment of section 16 40. New section 26 finance (No. 2) 5 laws of MALAYSIA Act 624 FINANCE ACT (No. 2) Order 2002 an act to amend the income tax Act 1967, the income tax Act (Amendment), 2002, the stamp Act Tax Act 1949 and Labuan Offshore Business Activity, 1990.
[] enacted by the Parliament of Malaysia as follows: CHAPTER I preliminary short title 1. This Act may be cited as the Finance Act (No. 2) Order 2002.
Amendment Of Act 2. The income tax Act 1967 [Act 53], the income tax Act (Amendment) Act 2002 [Act A1151], the stamp Act 1949 [Act 378] and Tax Act Labuan Offshore Business Activity, 1990 [Act 445] is amended in the manner set out in Chapters II, III, IV and v. CHAPTER II AMENDMENTS to the income tax Act 1967 commencement amendments to the income tax Act 1967 3. (1) sections 4, 6, 8, 9, 10, 11, 12, 13, 16, 17, paragraph 19 (a), sections 20, 21, 22, 23, 28 and 29 in force for year of assessment 2003 and for the next year of assessment.
Laws of Malaysia ACT 6246 (2) section 5 is deemed to have effect from the year of assessment 2002 and the next year of assessment.
(3) section 7, 18 and 24 come into force on 21 September 2002.
(4) section 14, 15 and 27 with effect from the commencement of this Act.
(5) Paragraph 19 (b) is deemed to have effect from year of assessment 2001 and the next year of assessment.
(6) section 25 and 26 is deemed to have effect from the year of assessment 2000 (current year) and for any subsequent year of assessment.
Amendment of section 6 4. Section 6 of the principal Act is amended by deleting paragraphs (1) (g).
Amendment of section 7 5. Section 7 of the principal Act is amended in paragraph (1) (b) in the proviso by inserting after the words "such period" the words "or that your period, as the case may be, if he is in Malaysia immediately prior to and after that temporary absence".
Deletion of section 11 6. The principal Act is amended by deleting section 11.
Amendment of section 15A 7. Section 15A of the principal Act is amended — (a) by replacing the full stop at the end of subparagraph (iii) with colons; and (b) by inserting under subparagraph (iii) the following proviso to section 15A: "Likely that in respect of paragraphs (a) and (b), this section shall apply to the amount attributable to services which are performed in the country.".
Finance (No. 2) 7 amendment of section 18 8. Section 18 of the principal Act is amended by inserting after the definition of "insurance" the following definition: ' "licensed Malaysian offshore bank" has the meaning assigned to it by the Labuan Offshore Business Activity Tax Act 1990 [Act 445]; '.
Deletion of section 31 9. The principal Act is amended by deleting section 31.
Deletion of section 37 10. The principal Act is amended by deleting section 37.
Amendment of section 38 11. Section 38 of the principal Act is amended — (a) by replacing subparagraph (1) (b) (ii) with the following subparagraph: "(ii) any expenses incurred for the repair or maintenance of the premises (excluding expenses of a capital nature and expenses incurred in connection with the upkeep of land attached to the premises for use by way of amenity as garden or grounds) which the employee , listed to the terms on which that accommodation is so, likely, is legally bound to meet in respect of that accommodation during that period; ";
(b) in subsection (4), by substituting for the words "paragraph 37 (3) (b)" with the words "subsection (6)"; and the laws of Malaysia ACT 6248 (c) by inserting after subsection (5) of the following subsection: "(6) In the application of subsection (4) in relation to a person's gross income from his employment where the expenses, to which subparagraph (1) (b) (ii) applies is shown for a period (in this subsection referred to as the" overlapping period ") which overlaps the base-period or part of the basis of the month , the amount of the expense to be deducted from that gross income shall be determined in accordance with the following formula: A x C — B where A is the number of days living accommodation is likely in the base period or part of the base-period that falls in the overlapping period;
B is the total number of days in the overlapping period; and C is the amount of expenses to which subparagraph (1) (b) (ii) applies. ".
Amendment of section 60 12. Section 60 of the Act is amended by inserting after the word "derived" the words "excluding the gross income, adjusted income or adjusted loss and statutory income attributable to an offshore business activity of a licensed Malaysian offshore bank".
The cut section 60E 13. The principal Act is amended by deleting section 60E.
Finance (No. 2) 9 amendment of section 75 14. Section 75 of the Act is amended in subsection (1) — (a) by substituting for the words "Notwithstanding anything to the contrary to this Act or any other written law, the" with the word "The"; and (b) by deleting the words "including the payment of tax".
New section 75A of the 15. The principal Act is amended by inserting after section 75 the following section: "Placed liability 75A. (1) Notwithstanding anything to the contrary to this Act or any other written law, where any tax is due and shown under this Act by a company, any person who is a director of that company during the period in which that tax is liable to be paid, shall be jointly and severally liable for such tax that is due and shown and shall be recoverable under section 106 from that person.
(2) In this section, "director" means any person who — (a) is occupying the position of director (by whatever name called), including any person who is concerned in the management of the citizen business; and (b) is, either on his own or with one or more associates within the meaning of subsection 139 (7), the owner of, or able directly or through the medium of other companies or by any other indirect means to control, more than fifty per cent of the ordinary share capital of the company ("ordinary share capital" here having the same meaning as in the definition of "director" in section 2). ".
Amendment of section 82 16. Section 82 of the Act is amended in subsection (1) by substituting for the word "Subject" with the words "Notwithstanding section 82A and subject".
Laws of Malaysia ACT 62410 new section 82A 17. The principal Act is amended by inserting after section 82 the following section: "Duty to keep documents for ascertaining chargeable income and tax shown 82A. (1) Subject to this section, every person who is required to furnish a return of his income for a year of assessment under this Act shall keep and retain in safe custody sufficient documents for a period of seven years from the end of that year of assessment for the purposes of ascertaining his chargeable income and tax shown.
(2) Where a person referred to in subsection (1) has not furnished a return as required under this Act for a year of assessment, that person shall keep and retain the documents referred to in subsection (1) that relate to that year of assessment for a period of seven years after the end of the year in which the return is furnished.
(3) The Director General may waive all or any of the provisions of subsection (1) in respect of any income or commissions.
(4) Any person who is required by this section to keep documents and — (a) does so electronically shall retain them in an electronically readable form and shall keep the documents in such a manner as to enable the documents to be readily accessible and convertible into writing; or (b) has originally kept documents in a manual form and subsequently converts your those documents into an electronic form shall retain those documents prior to the conversion in their original form.
(5) All documents that relate to any income in Malaysia shall be kept and retained in Malaysia.
Finance (No. 2) 11 (6) For the purposes of this section, "documents" means —

(a) statement of income and expenditure; and (b) invoices, vouchers, receipts and such other documents as are necessary to verify the since in a return. ".
Amendment of section 107A 18. Section 107A of the principal Act is amended — (a) in paragraph (1) (a), by substituting for the words "fifteen" with the word "ten"; and (b) in paragraph (1) (b), by substituting for the word "five" with the word "three".
Amendment of section 108 19. Section 108 of the principal Act is amended — (a) by inserting after subsection (1) of the following subsection: "(1A) For the purposes of subsection (1), where a company to which paragraph 2A of Schedule 1 applies, the rate incurred to that company shall be the higher of the two rates specified in that paragraph."; and (b) by inserting after subsection (15) of the following subsection: "(16) Notwithstanding the foregoing subsections, where — (a) the for is 0 by an amount under subsection (7) or (9); or (b) the amount due is 0 by an amount under subsection (10), the Director General may in his discretion, for any good cause expected, remit the whole or any part of that amount and, where the amount remitted has been paid, the Director General shall repay the same. ".
Laws of Malaysia ACT 62412 amendment of section 111 20. Section 111 of the Act is amended by inserting after subsection (1) of the following subsection: "(1A) Where a company has furnished a return in accordance with subsection 77 (1A) to the Director General for a year of assessment and that company has paid tax in the amount shown for excess of — (a) that return shall be deemed to be a notification under subsection (1); and (b) that company is deemed to have been notified of the for excess amount on the day that return is furnished.
(1B) Where subsection (1A) applies — (a) the reference to tax shall be taken to be a reference to an amount of tax set-off under section 110; and (b) the reference to amount shown under shall be taken to be a reference to the amount of tax shown before taking into account the tax set-off under section 110. ".
Deletion of section 128 21. The principal Act is amended by deleting section 128.
Amendment of section 131 22. Section 131 of the Act is amended in subsection (2) by deleting the words "and subsection 128 (5)".
Amendment of Schedule 1 23. Table 1 of the principal Act is amended — (a) in part I — (i) in subparagraph 2 (a), by inserting after the words "company" for the words "other than a company to which paragraph 2A applies"; and finance (No. 2) 13 (ii) by inserting after paragraph 2 the following paragraph: "2A. Subject to paragraph 3, income tax shall be charged for a year of assessment on the chargeable income of a company resident in Malaysia which has a paid-up capital in respect of ordinary shares of two million five hundred thousand dollars and less at the beginning of the basis period for a year of assessment at the following rates: Chargeable income RM Rate of income tax For every ringgit 100,000 20 per cent of the first For every 100,000 dollars 28 per cent "; exceeding and (b) by deleting part VII.
Amendment of Schedule 3 24. (1) Schedule 3 of the principal Act is amended by inserting after paragraph 79 the following paragraph: "80. The Minister may prescribe a building which is constructed or purchased by any person and used by him for the purposes of his business as an industrial building and the amount of the allowance or allowances which would otherwise fall to be made to him under paragraph 12, 16 or 42. ".
(2) where the Minister has approved a building as industrial buildings or such amount as an allowance or allowances as an amount of allowance or allowances which otherwise would enter under paragraph 12, 16 or 42 table 3 Principal Act before the commencement of subsection (1) — (a) the approval shall be deemed to be a determination made under paragraph 80 Schedule 3 of the principal Act is entered through amendment in subsection (1); and the laws of Malaysia ACT 62414 (b) the Minister may impose conditions on the approval and if the conditions imposed on the approval, the Minister may impose additional conditions.
Amendment of Schedule 4 25. Table 4 of the principal Act is amended in subparagraph 2 (a) by substituting for the words "may elect to claim, within three months after the beginning of the year of assessment in the basis period in which the expenditure was incurred or within such period in that year of assessment as the Director General may allow," the words "in the basis period for a year of assessment may elect to claim in a return of his income for that year of assessment.
Amendment of schedule 4A 26. Table 4A of the Act is amended in paragraph 3 by replacing the words "may elect to claim within three months after the beginning of the year of assessment in the basis period in which that business is commenced or within such further period as the Director General may allow," the words "in the basis period for a year of assessment may elect to claim in a return of his income for that year of assessment.
Amendment of Schedule 4 c 27. Table 4 c of the principal Act is amended in subparagraph 2 (a) by substituting for the word "" 2003 "with the words" 2005 ".
Amendment of Schedule 6 28. Table 6 of the principal Act is amended — (a) in subsubperenggan 15 (1) (b), by substituting for the word "four" with the word "six"; and (b) in paragraph 35 — (i) in subparagraph (a), by inserting after the words "issued" or the word "guaranteed";
Finance (No. 2) 15 (ii) by replacing subparagraph (b) with the following subparagraph: "(b) in respect of debentures, other than convertible loan stock, approved by the Securities Commission; or "; and (iii) by deleting subparagraph (c).
Amendment of schedule 7A 29. Table 7A of the principal Act is amended — (a) in subparagraph 1 (b), by inserting after the word "project" for the words "referred to under subparagraph 8 (a) or (b)";
(b) in paragraph 1A, by inserting after the words "qualifying project" word "referred to under subparagraph 8 (c)";
(c) by inserting after paragraph 1B the following paragraph: "1 c. Where a person who carries on a business and that business has been in operation for not less than twelve months and that person is a resident in Malaysia for the basis year for a year of assessment has incurred in the basis period for that year of assessment, capital expenditure in relation to an agriculture project in Malaysia for the purpose of any qualifying project referred to under subparagraph 8 (d) , there shall be given to that person for that year of assessment a reinvestment allowance of sixty per cent of that expenditure: Likely that where this paragraph applies to an individual, that individual must be a citizen in the basis year for that year of assessment. ";
(d) in paragraph 2 — (i) by substituting for the words "or 1A" the words ", 1A or 1 c"; and (ii) by substituting for the words "the capital expenditure was first incurred" the words "a claim for that allowance was first made in the return of his income in respect of that capital expenditure";
Laws of Malaysia ACT 62416 (e) in paragraph 2A — (i) by substituting for the words "or 1A" the words ", 1A or 1 c"; and (ii) by substituting for the word "company" with the word "person";
(f) in paragraph 3 — (i) by substituting for the word "company" with the word "person" in wherever there is;
(ii) by substituting for the words "or 1A" the words ", 1A or 1 c"; and (iii) of the proviso, by inserting after the word "State" for the words "the Federal Territory of Labuan,";
(g) in paragraph 4, by substituting for the word "company" with the word "person" in wherever there is;
(h) in paragraph 8 — (i) in subparagraph (b), by deleting the word "or";
(ii) in subparagraph (c), by substituting for the full stop at the end of the subparagraph the words "excluding the business of rearing chicken and ducks; or "; and (iii) by inserting after subparagraph (c) the following subparagraph: "(d) a project undertaken by a person in transforming his business of rearing chicken and ducks from an opened house to a closed house system as verified by the Minister of Agriculture.";
(i) in paragraph 9 of — (i) in the definition of "capital expenditure", by substituting for the words "paragraph 1A" with the words "paragraphs 1A and 1 c";
Finance (No. 2) 17 (ii) in subparagraph (e), by deleting the word "or";
(iii) in subparagraph (f), by substituting a comma at the end of the subparagraph the words "; or ";
(iv) by inserting after subparagraph (f) subparagraph the following: "(g) the construction of chicken and duck houses,";
(v) in subparagraph (ee), by deleting the word "and";
(vi) in subparagraph (ff), by inserting after a semicolon at the end of the subparagraph the word "and";
(vii) by inserting after subparagraph (ff) the following subparagraph: "(gg) rearing of chicken and ducks;";
(viii) by replacing the definition "Eastern Corridor of Peninsular Malaysia" with the following definition: ' "Eastern Corridor of Peninsular Malaysia" means the States of Kelantan, Terengganu and Pahang, and the District of Mersing in the State of Johor; ';
(ix) by replacing the full stop at the end of the definition of "incurred" by the semicolons; and (x) by inserting after the definition of "incurred" the following definition: ' "operation" means an activity which consists of the carrying on of a business referred to in paragraph 8. '; and the laws of Malaysia ACT 62418 (j) by inserting after paragraph 10 the following paragraph: "11. For the purpose of paragraph 1 c, where —

(a) a company or a partnership (hereinafter referred to in this subparagraph as the "new partnership") commences to carry on a business of rearing chicken and ducks; and (b) that the business is a "of a business carried out by a sole proprietor or a partnership (hereinafter referred to in this subparagraph as" historic partnership ") for a period of not less than twelve months prior to that LDP, that period, in relation to that company and the new partnership, shall be taken into account in ascertaining the period of not less than twelve months referred to in that paragraph : Likely that the sole proprietor or any of the partners in the old partnership holds any share in that company or is the partner of the new partnership, as the case may be.
12. Where a person has a source within the meaning of sections 55 to 58, the rules comes under paragraph 74 of Schedule 3 shall apply, mutatis mutandis, in ascertaining the allowance to be made to that person for a year of assessment under this Schedule. ".
CHAPTER III AMENDMENTS to the INCOME TAX ACT (Amendment), 2002 commencement amendments to the income tax Act (Amendment) Act 2002 30. Sections 31 and 32 effect for the year of assessment 2003 only.
Amendment of section 30 31. The income tax Act (Amendment) Act 2002, which is referred to as "the principal Act" in this chapter, is amended in paragraph 30 (3) (d) by replacing the words "paragraph 46 (1) (a) or section 47 or 48" with the words "section 45A, 47, 48, paragraph 46 (1) a or 46 (1) (e)" in wherever there is.
Finance (No. 2) 19 amendment of section 31 32. Section 31 of the Act is amended in subsection (2) by inserting after the words "30 (3) (d) of this Act" for the words "not exceeding thirty-five thousand dollars".
CHAPTER IV AMENDMENTS to the stamp Act 1949 commencement amendment to the stamp Act 1949 33. Sections 34, 35 and 36 comes into operation on 1 January 2003.
Amendment of section 9 34. Stamp Act 1949, which in the call "principal Act" in this chapter, is amended in paragraph 9 (1) c), by substituting for the words "five hundred dollars" with the words "two hundred dollars".
Amendment of section 47A 35. Section 47A of the principal Act is amended in subsection (1) — (a) in paragraph (a), by substituting for the word "fifty per centum" with the words "five per centum";
(b) in paragraph (b), by substituting for the words "one hundred per centum" with the words "ten per centum"; and (c) in paragraph (c), by substituting for the words "two hundred per centum" with the words "twenty per centum".
Amendment Of First Schedule 36. The first schedule of the principal Act is amended — (a) in item 22 by inserting after subbutiran (4) subbutiran the following: "(5) Being the security for securing the The same duty payment for the provision of services as a LEASE PROGRAM"; or facilities or to other matters or and things in connection with the lease of any immovable property laws of Malaysia ACT 62420 (b) in item 49 under the heading "Description of Instruments" — (i) by inserting after the words "LEASE OR AGREEMENT FOR LEASE PROGRAM" the words "of any immovable property and for securing the payment for the provision of services or facilities or to other matters or things in connection with such lease program";
(ii) in subparagraph (a), by inserting after the words "average rent" the words "and other considerations"; and (iii) in subparagraph (c), by inserting after the words "a rent" the words "or other considerations".
Chapter V AMENDMENTS to the TAX ACT LABUAN OFFSHORE BUSINESS ACTIVITY 1990 commencement amendments to Tax Act Labuan Offshore Business Activity 1990 37. Sections 38, 39 and 40 effect for the year of assessment 2004 and the next year of assessment.
Amendment of section 2 38. Business activity Tax Act Offshore Labuan 1990, called "the principal Act" in this chapter, is amended in section 2 — (a) in subsection (1) — (i) by inserting after the definition of "Labuan" the following definition: ' "the Malaysian offshore banks licensed" has the meaning assigned to it by the Offshore Banking Act 1990 [Act 443], which is the Office of a bank of Malaysia; ';
(ii) in the definition of "offshore" companies, by inserting after the words "the Act" the word ", a licensed offshore bank Malaysia, an offshore limited partnership"; and finance (No. 2) 21 (iii) by inserting after the definition of "offshore insurance business" the following definition: ' "offshore limited partnership" has the meaning assigned to it in the Limited Partnership Act Offshore Labuan 1997 [Act 565]; '; and (b) in subsection (3) — (i) in paragraph (a), by inserting after a semicolon for the word "or"; and (ii) by deleting paragraph (b).
Amendment of section 16 39. The principal Act is amended in section 16 — (a) in paragraph (e), by deleting the word "and";
(b) in paragraph (f), by replacing the full stop at the end of the paragraph the words "; and "; and (c) by inserting after paragraph (f) the following paragraph: "(g) in the case of a partnership, the partner or partner-partner.".
New section 26 40. The principal Act is amended by inserting after section 25 the following section: "Exception by Minister 26. (1) the Minister may, by order published in the Gazette, exempt any offshore company from all or any provisions of this act either generally or in respect of any taxable profits for the company.
(2) any order made under subsection (1) shall be presented in the House of Commons. ".
Laws of Malaysia ACT 62422 laws of MALAYSIA Act 624 FINANCE ACT (No. 2) Order 2002 LIST AMENDMENT law short title force amend from — NO — finance (No. 2) 23 laws of MALAYSIA Act 624 FINANCE ACT (No. 2) Order 2002 LIST SECTION AMENDED Section Power amend with effect from — NO —