FINANCE ACT 2006

and section 33 have effect for the year of assessment 2007

and subsequent years of assessment.

Act 661

Section 5, paragraph 24(a), sections 26, 27, 28, 29 and paragraph 30(b) come into operation on 1 January 2007.

Section 18 has effect for the year of assessment 2006 and subsequent years of assessment.

Section 20 comes into operation on the coming into operation of this Act.

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

in subsection (1)—

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

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

in subsections (1) and (4), by substituting for the words

“, (3) and (3a)” the words “and (3)”; and

by deleting subsection (3a).

Deletion of section 6b

in subparagraph (a)(ii), by inserting after the semicolon the word “and”;

by substituting for the words “; and” at the end of paragraph (b) a full stop; and

by deleting paragraph (c).

Act 661

Amendment of section 30

by substituting for the word “and” at the end of paragraph (a)

the word “or”;

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

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

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

in paragraph (m), by inserting after the words “(l)(i)” the words “and subject to subparagraph (l)(viii)”.

Amendment of section 43

in paragraph (1)(d), by substituting for the words “or

” the words “, (11a), (11b) or (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

in subsection (1)—

in paragraph (f), by inserting after the word

“accounting” the words “, Islamic financing”;

by substituting for the words “seven hundred”

the words “one thousand”; and

by substituting for the full stop at the end of that paragraph the words “; and”; and

in subsection (3), by substituting for the words “and (i)”

the words “, (i) and (j)”.

Amendment of section 60f

in the definition of “investment holding company”, by inserting after the words “gross income” the words

“other than gross income from a source consisting of a business of holding of an investment”; and

by inserting before the definition of “investment holding company” the following definition:

‘ “business of holding of an investment” means business of letting of property where a company in any year of assessment provides any maintenance or support services in respect of the property;’.

Amendment of section 61a

or (c) and the total sum” the words “a sum equal to ten per cent of the amount which he fails to pay, and that amount and the increased sum”.

Amendment of section 109d

in subsection (2), by substituting for the words “non-resident unit holder” the words “unit holder other than a unit holder which is a resident company”; and

in subsection (3), by substituting for the words “an amount equal to ten per cent of the income liable to deduction of tax under that subsection and the total sum” the words

“a sum equal to ten per cent of that amount, and the amount which he fails to pay and the increased sum”.

Act 661

Amendment of section 111

The Director General may withdraw, either wholly or partly, any public ruling made under this section.

Notwithstanding any other provision of this Act, where a public ruling in subsection (1) applies to any person in relation to an arrangement and the person applies the provision in the manner stated in the ruling, the Director

General shall apply the provision in relation to the person and the arrangement in accordance with the ruling.

Advance ruling 138b.  (1)  Subject to this section or any rules prescribed under this Act, on the application made by any person, the Director General shall make an advance ruling on the application of any provision of this Act to the person and to the arrangement for which the ruling is sought.

An application under subsection (1) shall be made in the prescribed form and shall contain particulars as may be required by the Director General.

Finance 17

The Director General may at any time withdraw any advance ruling made under subsection (1) by giving a notice in writing of such withdrawal to the person to whom the ruling applies.

Notwithstanding any other provision of this Act, where an advance ruling applies to any person in relation to an arrangement and the person applies the provision in the manner stated in the ruling, the Director General shall apply the provision in relation to the person and that arrangement in accordance with the ruling.

An advance ruling on any of the provision of this Act shall apply to a person in relation to an arrangement if the provision is expressly referred to in the ruling and for the basis period for year of the assessment for which the ruling applies.

A ruling made under subsection (1) does not apply to a person in relation to an arrangement if—

by substituting for subsection (3) the following subsection:

“(3) For the purposes of this Act, “tax agent” means any professional accountant or person, approved by the

Minister.”; and

in subsection (4), by substituting for the words “paragraph

Amendment of section 154

in Part I—

in paragraph 1, by inserting after the words “1a,

2” the words “, 2a”; and

by substituting for Part X the following Part:

“Part X

and subject to paragraphs (b) and (c), income tax shall

Finance 19

be charged for a year of assessment on the income of a unit holder other than a unit holder which is a resident company consisting of income distributed to the unit holder referred to in section 109d which is derived from

Malaysia at the rate of 15% of gross;

and subject to paragraph (c), income tax shall be charged for a year of assessment on the income of a unit holder which is a non-resident company consisting of income distributed to the unit holder referred to in section 109d which is derived from Malaysia at the rate of 27% of gross; and

and income tax shall be charged for a year of assessment on the income of a unit holder which is a foreign institutional investor consisting of income distributed to the unit holder referred to in section 109d which is derived from Malaysia at the rate of 20% of gross.

by deleting the words “Culture, Arts and” at the end of paragraph 37f; and

in paragraph 42b, by inserting after the word “Education”

the words “or Minister of Higher Education”.

Amendment of Schedule 6

in paragraph 15, by inserting after subparagraph (2) the following subparagraph:

“(3)  In this paragraph, “compensation for loss of employment”

shall include any payment made by an employer to an employee of his pursuant to a separation scheme where employees are given an option for an early termination of an employment contract provided that such scheme from which payment was made does not expressly or impliedly provide for the employee to be reemployed under any other scheme of employment by the same or any other employer.”;

Act 661

by inserting after paragraph 25b the following paragraph:

“25c.  Perquisite consisting of long service, past achievement or service excellence award, whether in money or otherwise, provided to an employee pursuant to his employment, limited to a maximum amount or value of one thousand ringgit for each employee for a year of assessment provided that exemption in respect of long service award shall apply only after the employee has exercised an employment for more than ten years with the same employer.”;

in paragraph 32a, by inserting after the word “Education”

the words “or Ministry of Higher Education”;

by substituting for paragraph 33 the following paragraph:

“33.  Income of any person not resident in Malaysia for the basis year for a year of assessment, in respect of interest derived from

Malaysia (other than such interest accruing to a place of business in Malaysia of such person) and paid or credited by any person

(whether the same person or not) carrying on the business of banking or finance in Malaysia and licensed under the Banking and Financial Institutions Act 1989 or the Islamic Banking Act 1983, or by any other institution approved by the Minister:

Provided that the exemption under this paragraph shall not apply to interest paid or credited on funds required for purposes of maintaining net working funds as prescribed by the Central

Bank of Malaysia pursuant to section 37 of the Banking and

Financial Institutions Act 1989 and subsection 5(2) of the Islamic

Banking Act 1983, as the case may be.”; and

by substituting for paragraph 34 the following paragraph:

“34.  (1)  Income of an individual derived from exercising an employment on board a ship used in a business operated by a person being a registered owner of a ship under the Merchant

Shipping Ordinance 1952 who is resident in Malaysia.

For the purpose of this paragraph “ship” means a sea­going ship other than a ferry, barge, tug-boat, supply vessel, crew boat, lighter, dredger, fishing boat or other similar vessel.”.

Amendment of Schedule 7

in paragraph 5, by inserting after the words “proportion as” the words “his statutory income in respect of”;

and

Finance 21

in paragraph 16, in the definition of “foreign income”, by inserting after the word “Malaysia” the words “or in the case of bilateral credit, includes income derived from Malaysia charged to foreign tax”.

Amendment of Schedule 7a

Section 37 comes into operation on the coming into operation of this Act.

Section 38 is deemed to have come into operation on 2

September 2006.

Amendment of section 9

by substituting for paragraph 16 the following paragraph:

“16.  Where a contract for the disposal of an asset is conditional and the condition is satisfied (by the exercise of a right under an option or otherwise), the acquisition and disposal of the asset shall be regarded as taking place at the time the contract was made, unless—

the acquisition or disposal requires the approval by the

Government or an authority or committee appointed by the Government, the date of disposal shall be the date of such approval; or

the approval referred to in subparagraph (a) is conditional, the date of disposal shall be the date when the last of all such conditions is satisfied.”; and

by inserting after paragraph 17 the following paragraph:

“Transfer of assets into stocks 17a.  Notwithstanding any other provisions of this Act—

if an asset acquired or held by a person is taken into the trading stock of the person, there shall be deemed to be a disposal of chargeable asset; and

the disposal price of the chargeable asset shall be equal to the market value at the date the asset is taken into stock.”.

in relation to the manufacturing, manufacturing related services and agro-based industries sectors, an enterprise with full-time employees not exceeding one hundred and fifty people or annual turnover not exceeding twenty-five million ringgit; and

in relation to the services, primary agriculture, and information and communication technology sectors, an enterprise with full-time employees not exceeding fifty people or annual turnover not exceeding five million ringgit;’.

Deletion of section 5a

in subsection (3), by inserting after the word “books” the words “, records and documents”; and

Act 661

by inserting after subsection (3) the following subsection:

“(4)  For the purpose of subsection (3), the banker, dealer or insurer shall keep and retain the books, records and documents in connection with the issue of such cheques, contract notes or policies of insurance for a period of seven years from the year in which such cheques, contract notes or policies of insurance are issued.”.

Amendment of section 57

by deleting paragraph (c); and

by substituting for paragraph (e) the following paragraph:

“(e) the stamp on any promissory note which from any omission or error has been spoiled or rendered useless, although the same, being a promissory note, may have been delivered to the payee, provided that another completed and duly stamped promissory note, is produced identical in every particular except in correction of the error or omission, with the spoiled note;”.

Amendment of section 80

in subsection (1a)—

in paragraph (i), by inserting after the word

“instrument” the words “or all instruments in relation to any scheme”; and

in subsection (3), by inserting after the words “or (2)”

the words “or any exemption, reduction or remission made under subsection (1a)”.

Amendment of First Schedule

in the proviso to subsection (1), by substituting for the word “five” the word “seven”; and

by inserting after subsection (1d) the following subsections:

“(1e)  The chargeable income of a chargeable person for a year of assessment shall consist of the amount of his assessable income for that year reduced by 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:

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 statutory income of the relevant person and the total amount that has been deducted pursuant to the proviso to subsection

and subsection (1f).

The chargeable income of a chargeable person for a year of assessment shall consist of the amount of his assessable income for that year reduced by 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 statutory income of the relevant person and the amount that has been deducted pursuant to the proviso to subsection (1)

and subsection (1e).”.

Finance 27

in the shoulder note, by inserting after the word “for”

the words “doubtful debt or”;

in paragraph (1)(b), by inserting after the words “such person” the words “has been provided in his accounts as doubtful debt or”; and

by substituting for subsection (4) the following subsection:

“(4)  For the purpose of this section—

“bad debt” means the outstanding amount of the payment in respect of the sale of taxable goods including the sales tax which is due to the person but has not been paid to, and is irrecoverable by the person;

“doubtful debt” means a provision made with respect to the outstanding amount in the person’s accounts consistent with the generally accepted accounting principles.”.

in the shoulder note, by inserting after the word “for”

the words “doubtful debt or”;

in paragraph (1)(b), by inserting after the words “such person” the words “has been provided in his accounts as doubtful debt or”; and

Act 661

by substituting for subsection (4) the following subsection:

“(4)  For the purpose of this section—

“bad debt” means the outstanding amount of the payment in respect of the provision of taxable services including the service tax which is due to the person but has not been paid to, and is irrecoverable by the person;

“doubtful debt” means a provision made with respect to the outstanding amount in the person’s accounts consistent with the generally accepted accounting principles.”.

Finance 29

Act 661

finance ACT 2006

list of amendments

Amending law

Short title

In force from

– NIL –

Act 661

Act 661

finance ACT 2006

list of sections amended

Section

Amending authority

In force from

– NIL –

KUALA LUMPUR