Finance Act 2004

Original Language Title: Finance Act 2004

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Laws of Malaysia Act 639 Re-printing of the Finance Act 2004 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 639 of the Finance Act 2004 the date of Royal Assent............ 4 December 004 date of publication in the Gazette of ... ... more 30 December 004 Finance 3 laws of Malaysia Act 639 of the Finance Act 2004 arrangement of sections Chapter i preliminary section 1. short title. Amendment Act Chapter ii amendments to the income tax Act 1967 3. Commencement amendments to the income tax Act 1967 4. Amendment of section 5. Amendment of section 6 6. Amendment of section 6a 7. Amendment of section 34 8. Amendment of section 44 9. Amendment of section 45a 10. Amendment of section 46 11. Amendment of section 47 1. Amendment of section 49 13. Amendment of section 61 14. New section 61a 15. Amendment of section 63a 16. Amendment of section 63B 17. New section 63c 18. Special provisions relating to section 63c 4 laws of Malaysia Act 639 19. 63d new section 0. Amendment of section 77 1. Amendment of section 86. Amendment of section 103 3. New section 109d 4. New section 111B 5. New section 111c 6. Amendment of section 151 7. Amendment of Schedule 1 8. Amendment of Schedule 3 9. Special provisions relating to paragraph 3 of Schedule 3 30. Special provisions relating to paragraph 35 table 3 31. Amendment of schedule 4a 3. Amendment of Schedule 4 c 33. Amendment of Schedule 6 Chapter iii Amendments to the Petroleum (income tax) 1967 34. Commencement of the Act the amendments to the Petroleum (income tax) 1967 35. Amendment of section 36. Amendment of section 18 37. Amendment of second schedule 38. Special provisions relating to paragraph 3 of the second schedule 39. Special provisions relating to paragraph 18 of the second schedule chapter iV amendments to the real property gains tax Act 1976 40. Commencement amendments to the real property gains tax Act 1976 41. Amendment of schedule finance section 5 chapter V amendments to the stamp Act 1949 section 4. Commencement amendment to the stamp Act 1949 43. Amendment of first schedule 6 laws of Malaysia Act 639 Finance 7 laws of Malaysia Act 639 of the Finance Act 2004, an act to amend the income tax Act 1967, the Petroleum (income tax) in 1967, the real property gains tax Act 1976 and the stamp Act 1949.
[] enacted by the Parliament of malaysia as follows: Chapter i preliminary short title 1. This Act may be cited as the Finance Act 004.
Amendment of Act 2. the income tax Act 1967 [Act 53], the Petroleum (income tax) 1967 [Act 543], real property gains tax Act 1976 [Act 169] and stamp Act 1949 [Act 378] 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, 5, 6, 7 and subparagraph (b) (ii) and section 8, 9, 10, 11, 1, 13, 14, 15, 16, 17, 18, 19, 3, 7, 8, 9, 30, 31 and 3 effect for the year of assessment 005 and the next year of assessment.
8 laws of Malaysia Act 639 () of paragraph 7 (a) with effect from year of assessment 001 and the next year of assessment.
(3) Subparagraph 7 (b) (i) and section 0, 1 and effect for the year of assessment 004 and the next year of assessment.
(4) sections 4, 5 and 6 come into force on January 1, 005.
(5) Paragraph 33 (a) with effect from year of assessment 003 and the next year of assessment.
(6) Paragraph 33 (b) is deemed to have come into force on 11 September 004.
Amendment of section 2 4. income tax Act 1967, which is referred to as "the principal Act" in this chapter, is amended in the section — (a) in subsection (1) — (i) by inserting after the definition of "business" the following definition: ' "Central bank" means the Central bank of malaysia was under section 3 of the Central bank of malaysia act 1958 [Act 519] '; and (ii) by inserting after the definition of "royalty" the following definition: ' "Securities Commission" means the Securities Commission was under section 3 of the Securities Commission act 1993 [Act 498] '; and (b) in subsection (8) by substituting for the words "in accordance with the principles of Sharia" with the words "approved by the Central bank or the Securities Commission, as a scheme which is in accordance with the principles of Shariah where such disposal is strictly Financial 9 (required) for the purpose of complying with those principles but which will not be required in any other schemes of financing".
Amendment of section 6 5. Subsection 6 (1) of the principal Act is amended — (a) in paragraph (h) by replacing the full stop at the end of the paragraph with semicolons; and (b) by inserting after paragraph (h) of the following paragraph: "(i) subject to the provision of section 109d but notwithstanding any other provisions of this act, the income tax shall be charged for each year of assessment upon the income of a non-resident units, it explains 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.".
Amendment of section 6A 6. Subsection 6a (3a) of the principal Act is amended by substituting for the words "four hundred" with the words "five hundred".
Amendment of section 34 7. Section 34 of the principal Act is amended — (a) by inserting after subsection (3) of the following subsection: "(3a) the reference to the debt which is partly irrecoverable under paragraph () (b), shall be deemed, in the case of a bank, to include all interest in respect of a loan or credit facility accrued from the date that such loan or facility is classified as non-performing loan in accordance with the relevant guidelines issued by the Central bank.
(3B) For the purpose of subsection (3a), "bank" means a bank or a finance company or a banking and 10 laws of Malaysia Act 639 finance company licensed or deemed to be licensed under the banking and Financial institutions act 1989 [Act 372] or islamic banking act 1983 [Act 276], or an institution comes under the Development Financial institutions act 00 [Act 618] "; and (b) in subsection (6) — (i) by replacing paragraph (c) with the following paragraph: "(m) an amount equal to the expenditure, not being capital expenditure, incurred by a company in the relevant period for the purpose of obtaining accreditation for a laboratory or as a certification body, as evidenced by a certificate issued by the Department of Standards malaysia:, likely that the expenditure incurred in the relevant period shall be deemed to be incurred by that company in the basis period for the year of assessment in which the certificate is issued; "; and (ii) by inserting after paragraph (m) as amended the following paragraph: "(ma) an amount is twice the amount of the expenditure, not being capital expenditure, incurred by a company in the relevant period for the purpose of obtaining certification for recognized quality systems and standards, and halal certification, analysis by a certificate issued by a certificaction body as determined by the minister : Likely that the expenditure incurred in the relevant period shall be deemed to be incurred by that company in the basis period for the year of assessment in which the certificate is issued; ".
11 amendment of section 44 8. Section 44 of the principal Act is amended — (a) in paragraph (1) (d) by substituting for the words "or (11)" with the words ", (11) or (11a)"; and (b) by inserting after subsection (11) of the following subsection: "(11a) there shall be deducted listed to this subsection from the aggregate income of a company for the relevant year reduced by any deduction for that year in accordance with subsection (1) an amount equal to the payment of zakat on business which is paid in the basis period for that year of above normal to an appropriate religious authority was under any written law or any person authorized by such religious authority : Likely that — (a) the amount to be deducted listed to this subsection shall not vehicles one-fortieth of the aggregate income of the company in the relevant year; and (b) the company is not an offshore company. ".
Amendment of section 45A 9. Section 45a of the principal Act is amended by substituting for the word "two" with the word "three".
Amendment of section 46 10. Subsection 46 (1) of the principal Act is amended — (a) in paragraph (e) by replacing the word "five" with the word "six"; and (b) in paragraph (i) by substituting for the word "five" with the word "seven".
1 laws of Malaysia Act 639 amendment of section 47 11. Paragraph 47 (1) (b) of the principal Act is amended by substituting for the word "two" with the word "three".
Amendment of section 49 12. Section 49 of the principal Act is amended — (a) in subsection (1) by substituting for the word "five" with the word "six"; and (b) in subsection (1a) by substituting for the word "five" with the word "six".
Amendment of section 61 13. Section 61 of the principal Act is amended — (a) in the proviso to subsection (1a) by substituting for the words "exempt income" with the words "income exempt from tax, other than income exempt under Section 61a,"; and (b) by inserting after subsection (1a) of the following subsection: "(1B) any income which is distributed by a unit trust to a unit, it explains under subsection (1a) shall be deemed to be derived from malaysia.".
new section 61A 14. the principal Act is amended by inserting after section 61 the following section: "exemption of Real estate investment trust or Property trust Fund

61A. (1) the total income of a unit trust for a year of assessment which is equivalent to the amount of income distributed to the units, it explains in the basis period for that year of assessment which is ascertained by reference to the unit of holder's share of that income shall be exempt from tax.
Finance 13 () in this section, "unit trust" means a unit trust which is approved by the Securities Commission as real estate investment trust or Property trust Fund. ".
Amendment of section 63A 15. Section 63a of the principal Act is amended by inserting after subsection (5) of the following subsection: "(6) this section shall not apply to a unit trust referred to in subsection 61a ().".
Amendment of section 63b 16. Section 63B of the principal Act is amended by inserting after subsection () of the following subsection: "(3) this section shall not apply to a unit trust referred to in subsection 61a ().".
new section 63c 17. the principal Act is amended by inserting after section 63b the following section: "special treatment on rent from the letting of real property of a Real estate investment trust or Property trust Fund 63c. (1) the provision of this section shall apply notwithstanding any other provisions of this act.
() where in the year of assessment, income of a unit trust consists of a rent from the letting of real property, the amount of the rent shall be treated as gross income of a unit trust from a source consisting of a business for that year of assessment.
(3) ascertaining, in for a year of assessment, the adjusted income of a unit trust from a source referred to in subsection (), any commissions to be made under this act in arriving to 14 laws of Malaysia Act 639 that income, in respect of that source for the basis period for that year of assessment shall only be allowed against the gross income from that source trunk of — (a) where the amount of the deduction exceeds the gross income from that source for that year of assessment, the for excess shall be disregarded for the purposes of this act; and (b) where that source does not produce any income, the deduction from the gross income of that unit trust from that source of income shall not be allowed.
(4) in ascertaining, for a year of assessment, the statutory income of a unit trust from a source referred to in subsection (), any allowances for that year of assessment under Schedule 3 in respect of that source shall only be available against the adjusted income of that source and if by reason of an absence or insufficiency of adjusted income from that source for the basis period for that year of assessment , the effect can not be given or be given in full to any allowance for that year of assessment in relation to that source, that allowance which has not been so made shall not be made to the unit trust for any I years of assessment.
(5) For the purposes of this section, "unit trust" has the same meaning assigned to it under subsection 61a (). ".
Special provisions relating to section 63c 18. Notwithstanding the provisions of section 63c of the principal act as inserted by section 17 of this Act, the provisions of sections 43 and 44 of the principal Act shall apply to the funds said in section 63c of the principal Act in respect of a loss larasannya (if available) or an allowance that is deemed to have been made on the unit trust under paragraph 75 table 3 to the principal Act , which larasan losses allowance or unit trust has been determined before section 17 of this Act come into force.
63d new section 19. the principal Act is amended by inserting after section 63c the following section: Financial 15 "income of a unit trust from the letting of real property is not income from a business 63d. Subject to the provision of section 63c but not with standing any other provisions of this act, the income of a unit trust which consists of rent from the letting of real property shall not be treated as income from a source consisting of a business. ".
Amendment of section 77 20. Section 77 of the principal Act is amended — (a) by replacing subsection (1) unless the proviso to subsection with the following subsection: "(1) every person, other than a company, trust body or co-operative society to which section 77a applies, shall for each year of assessment, furnish to the Director general a return comes in the form of — (a) in the case of that person who is carrying on a business , not later than 30 june in the year following that year of assessment; or (b) in any other case than the case in paragraph (a), not later than 30 april in the year following the year of assessment: "; and (b) by inserting after subsection (1) as amended through this Act, the following subsection: "(1a) where subsection 45 () applies, a reference to a person under paragraph 1 (a) includes a reference to an individual where his wife or her husband who elects, as the case may be, is carrying on a business.".
Amendment of section 86 21. Subsection 86 (1) of the principal Act is amended by replacing the word "may" with the word "may".
16 laws of Malaysia Act 639 amendment of section 103 22. Subsections 103 (1) of the principal Act is amended — (a) in paragraph (a) by deleting the word "and" which appears at the end of the paragraph;
(b) by replacing paragraph (b) with the following paragraph: "(b) in the case of a person referred to under paragraph 77 (l) (a), 30 june in the year following the year of assessment; and "; and (c) by inserting after paragraph (b) the following paragraph: "(c) in any other case other than the cases referred to in paragraphs (a) and (b), the 30th of april in the year following the year of assessment.".
new section 109d 23. the principal Act is amended by inserting after section 109c the following section: "deduction of tax on the distribution of income of a unit trust 109d. (1) this section shall only apply to income of a unit trust which is exempt under section 61a.
() where a unit trust (in this section referred to as the payer) distributes income to a non-resident units, it explains which is deemed to be derived from malaysia, the payer shall upon distributing the income, deduct therefrom tax at the rate incurred to such income and shall within one month after distributing such income, rendering an account and pay the amount of that tax to the Director general : Likely that the Director general may — (a) give notice in writing to the payer requiring him to deduct and pay tax at any other rates or to distribute the income without deduction of tax; or Financial 17 (b) under special circumstances, allow extension of time for the amount of tax deducted to be paid over.
(3) where the payer fails to pay any amount due from him under subsection (), that amount which he fails to pay shall be 0 by an amount equal to ten per cent of the income liable to deduction of tax under that subsection and the total sum shall be a debt due from him to the government and shall be shown under forthwith to the Director general.
(4) 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, in the manner, likely by section 110, apply that amount towards payment of the tax charged on the unit, it explains to whom the payer distributes income to which that amount relates; and (b) if the payer has not deducted that amount in distributing the income under subsection () with respect to which that amount relates, he may recover that amount from that unit, it explains as a debt due to the payer.
(5) Section 110 shall apply mutatis mutandis to tax deducted under this section. ".
new section 111b 24. the principal Act is amended by inserting after section Vii section that follows: "Part Viia FunD For taX reFunD establishment of Fund for tax Refund 111b. (1) there is hereby was a fund, to be known as the Fund for tax refund (in this section referred to as "the Fund") which shall be specified in and incorporated into the Second Schedule to the Financial Procedure act 1957 [Act 61].
18 laws of Malaysia Act 639 () there shall be paid from time to time into the Fund such amount of tax collected under this act as may be authorized by the Minister.
(3) the moneys of the Fund shall be applied for the making of a refund of an amount of tax paid in for excess of the amount is shown as ascertained in section 111 of this act.
(4) the Fund shall be administered by the accountant general of malaysia.
(5) notwithstanding the provisions of subsection () and the Financial Procedure act 1957, the minister may from time to time authorize the payment into the Consolidated revenue account in the Federal Consolidated Fund of all or any part of the moneys of the Fund. ".
new section 111c 25. the principal Act is amended by inserting after section 111B the following section: "non applicability of section 14A of the Financial Procedure act 1957 111c. Section 14a of the Financial Procedure act 1957 shall not apply to any refund in for excess of the amount is shown as ascertained in section 111. ".
Amendment of section 151 26. the principal Act is amended by replacing section 151 with the following section: "Procedure for making refunds and repayments 151. Where the Director General is authorized or required by this act to make any refund or repayment, he shall certify the amount of the sum to be refunded or repaid and cause the refund or repayment to be made forthwith. ".
Finance 19 amendment of Schedule 1 27. table 1 of the principal Act is amended by inserting after section iX section that follows: "Part X notwithstanding Part i of the income tax shall be charged on the income of a non – resident units consisting of income, it explains the distributed to that unit, it explains referred to in section 109d which is derived from malaysia at the rate of 8% of gross.".

Amendment of Schedule 3 28. Schedule 3 of the principal Act is amended — (a) in paragraph 3 — (i) by the number of the paragraph as subparagraph 3 (1);
(ii) in subparagraph 3 (1) as numbered again, by substituting for the words "paragraphs 3a to" with the words "paragraph"; and (iii) by inserting after subparagraph 3 (1) of the following subparagraph: "() For the purpose of this Schedule, the qualifying building expenditure in the case of purchase of a building shall be the amount of the purchase price of that building.";
(b) by deleting paragraph 3a, 4 and 5; and (c) in paragraph 35 — (i) by replacing the full stop at the end of paragraphs that overlap with the full stop; and (ii) by deleting the proviso to paragraph.
Special provisions relating to paragraph 3 of Schedule 3 29. Notwithstanding the provisions of paragraph 3 of the Schedule 3 of the principal act as amended under paragraph 8 (a) of this Act, 0 laws of Malaysia Act 639 if an eligible building expenses amount determined pursuant to paragraph 3, 3a, 4 or 5 of the principal Act prior to the amendment of the paragraphs under section 8 of this Act takes effect, the amount of the expenses eligible building shall continue to apply for the purposes of the schedule.
Special provisions relating to paragraph 35 Table 3 30. Notwithstanding the provisions of paragraph 35 of Schedule 3 of the principal Act, if before amendments to the paragraph under paragraph 8 (c) of this Act in force, a person who has committed the capital expenditure for the construction or purchase of buildings used as the building industry, there are no kenaan (if any) made to that person under paragraph 35 of Schedule 3 of the principal act as amended if the buildings were disposed of after the basis period for that year of assessment is the twenty fifth year of assessment after the year of assessment in the base year the buildings were built.
Amendment of schedule 4A 31. Table 4a of the Act is amended by inserting after paragraph 8 the following paragraph: "9. the minister may prescribe any capital expenditure incurred by a person in his business as qualifying farm expenditure and the amount of deduction in respect of that qualifying farm expenditure which would otherwise fall to be made to him under paragraph 4.".
Amendment of Schedule 4 c 32. table 4 c of the principal Act is amended in paragraph (a) by substituting for the word "005" with the words "010".
Amendment of Schedule 6 33. table 6 of the principal Act is amended — (a) in subparagraph 5 (1) — (i) in subsubperenggan (a) by deleting the word "or" at the end of the subsubperenggan;
Finance 1 (ii) in subsubperenggan (b) by replacing the full stop at the end of the subsubperenggan with the words "; or "; and (iii) by inserting after the subsubperenggan (b) subsubperenggan the following: "(c) if the retirement takes place on reaching the age of retirement date listed to a contract of employment or collective agreement at the age of 50 but before 55 and that employment has lasted for ten years with the same employer or with companies in the same group:, likely that the sum shall not vehicles an amount ascertained by multiplying the sum of six thousand dollars by the number of completed years of service in that employment. "; and (b) by inserting after paragraph 33 the following paragraph: "33a. interest paid or credited to any company not resident in malaysia, other than such interest accruing to a place of business in malaysia of such company — (a) in respect of securities issued by the government; or (b) in respect of islamic securities or debenture issued in ringgit malaysia, other than convertible loan stock, approved by the Securities Commission. ".
Chapter iii Amendments to the Petroleum (income tax) Act 1967 commencement amendments to the Petroleum (income tax) 1967 34. (1) Section 35 effect for the year of assessment 003 and the next year of assessment.
() Of section 36 in force for year of assessment 005 and the next year of assessment.
(3) sections 37, 38 and 39 with effect from year of assessment 006 and the next year of assessment.
Laws of Malaysia Act 639 amendment of section 2 35. Petroleum Act (income tax) in 1967, which is referred to as "the principal Act" in this chapter, is amended in the section by substituting the definition of "petroleum operations" with the following definition: ' "petroleum operations" means — (a) searching for and winning or obtaining of petroleum in malaysia by or on behalf of any person for his own account or on a joint account with any other person by any drilling , mining, extracting or other like operations or process, in the course of a business carried on by that person engaged in such operations, and all operations incidental thereto, and any sale or disposal by or on behalf of that person of petroleum so won or obtained, and includes the transportation within malaysia by or on behalf of that person of petroleum so won or obtained to any point of sale or delivery or export , but does not include — (i) any transportation of petroleum on the efforts of malaysia;
(ii) any process of refining or liquefying of petroleum;
(iii) any dealings with products so refined or liquefied; or (iv) a service involving the supply and use of rigs, derricks, ocean tankers and barges; and (b) any sale or disposal by Petroleum nasional berhad within malaysia of petroleum obtained from the efforts of malaysia and includes the transportation within malaysia by, or on behalf of, Petroleum nasional berhad of such petroleum to any point of sale or delivery within malaysia; '.
Amendment of section 18 36. Paragraph 18 (1) (h) of the principal Act is amended — (a) by substituting a semicolon at the end of the paragraph with the periods overlap; and financial 3 (b) by inserting the proviso to paragraph as follows: "Likely that this paragraph shall not apply if the payer has paid the amount of deduction of tax and the 0 amount which is equal to ten per cent of that deduction which are due and shown under the provisions of that law;".
Amendment of second schedule 37. the second schedule of the principal Act is amended — (a) in paragraph 3 — (i) by the number of the paragraph as subparagraph 3 (1);
(ii) in subparagraph 3 (1) as numbered again, by substituting for the words "paragraphs 3a to" with the words "paragraph"; and (iii) by inserting after subparagraph 3 (1) of the following subparagraph: "() For the purpose of this Schedule, the qualifying building expenditure in the case of purchase of a building shall be the purchase price of that building.";
(b) by deleting paragraph 3a, 4 and 5; and (c) in paragraph 18 — (i) by replacing the full stop at the end of paragraphs that overlap with the full stop; and (ii) by deleting the proviso to paragraph.
Special provisions relating to paragraph 3 of the second schedule 38. Notwithstanding the provisions of paragraph 3 of the second schedule of the principal act as amended under paragraph 37 (a) of this Act, if an amount eligible building expenses is established in accordance with paragraph 3, 3a, 4 or 5 of the principal Act before force 4 laws of Malaysia Act 639 power of amendment the paragraphs under section 37 of this Act takes effect, the amount of the expenses eligible building shall continue to apply for the purposes of the schedule.
Special provisions relating to paragraph 18 of the second schedule 39. Notwithstanding the provisions of paragraph 18 of the second schedule of the principal Act, if before amendments to the paragraph under paragraph 37 (c) of this Act in force, a person who has committed the capital expenditure for the construction or purchase of buildings used as the building industry, there are no kenaan (if any) made to that person under paragraph 18 of the second schedule of the principal act as amended if the buildings were disposed of after the basis period for the year of assessment which was the fifth year of assessment after thirty years assessment in the base year which the buildings were built.
Chapter iV amendments to the real property gains tax Act 1976 commencement amendments to the real property gains tax Act 1976 40. This chapter is deemed to have come into force on 11 September 004.
Amendment of Schedule 2 41. real property gains tax Act 1976 is amended in the table in subparagraph 3 (g) by substituting the subparagraph with subparagraph the following: "(g) the disposal of any chargeable asset listed to a scheme of financing approved by the Central bank or the Securities Commission as a scheme which is in accordance with the principles of Shariah, where such disposal is strictly required for the purpose of compliance with those principles but which will not be required for any other schemes of financing. ".
5 financial chapter V amendments to the stamp Act 1949 commencement amendment to the stamp Act 1949 42. This chapter is deemed to have come into force on 11 September 004.
Amendment Of First Schedule 43. Stamp Act 1949 is amended in the first schedule under the heading "GENERAL EXEMPTIONS", by inserting after paragraph 5 the following paragraph: "6. an instrument and be listed to a scheme of financing approved by the Central bank or the Securities Commission as a scheme which is in accordance with the principles of Shariah, where such instruments is an additional instrument strictly required for the purpose of compliance with those principles but which will not be required for any other schemes of financing.".
6 laws of Malaysia Act 639 laws of Malaysia Act 639 of the Finance Act 2004 List Amendment law short title force amend from – no – Finance 7 laws of Malaysia Act 639 of the Finance Act 2004 amended Section List Section power amend with effect from – there are –