Malaysia legislation
Section 12
Section 12
New Chapter 9
Chapter 8 the following chapter:
“Chapter 9
Gains or profits from the disposal of capital asset
Interpretation of Chapter 9 65c. In this Chapter, unless the context otherwise requires—
“consideration” means consideration in money or money’s worth;
“disposal” means to sell, convey, transfer, assign, settle or alienate whether by agreement or by force of law and includes a reduction of share capital and purchase by a company of its own shares;
“shares” means all or any of the following:
(a)
stock and shares in a company;
(b)
loan stock and debentures issued by a company or any other corporate body incorporated in Malaysia;
(c)
a member’s interest in a company not limited by shares whether or not it has a share capital;
(d)
any option or other right in, over or relating to shares as defined in paragraphs (a) to (c).
Act 851
Application of Chapter 9 65d. (1) This Chapter shall apply for ascertaining the chargeable income of a company, limited liability partnership, trust body or co-operative society which receives gains or profits from the disposal of capital asset on or after 1 January 2024.
(2)
In a case where any provision of this Chapter applies, the foregoing Chapters shall also apply but shall be modified in their application to the extent necessary to conform with that provision; and, if in that case there is any inconsistency between that provision and any provision of the foregoing
Chapters, that provision of those Chapters shall be void to the extent of the inconsistency.
Gains or profits from the disposal of capital asset 65e. (1) For the purposes of this Act and subject to this section, the gains or profits from the disposal of capital asset in the basis period for a year of assessment shall be—
(a)
ascertained by reference to each disposal separately;
and
(b)
treated as a separate source of gains or profits, from the disposal of capital asset for that year of assessment.
(2)
Subject to this section, the adjusted income of a company, limited liability partnership, trust body or co-operative society from a source consisting of gains or profits from the disposal of capital asset, for the basis period for a year of assessment (in this section referred to as
“relevant year”) shall be ascertained by—
(a)
taking the amount or value of the consideration for the disposal of the capital asset at the time of disposal reduced by—
(i)
the amount of any expenditure wholly and exclusively incurred on the capital asset at any time after its acquisition by or on behalf of the company, limited liability partnership, trust body or co-operative society making
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the disposal for the purpose of enhancing or preserving the value of the capital asset, being expenditure reflected in the state or nature of the capital asset at the time of the disposal;
(ii)
the amount of any expenditure wholly and exclusively incurred at any time after the acquisition of the capital asset by the company, limited liability partnership, trust body or co-operative society in establishing, preserving or defending its title to, or to a right over, the capital asset; and
(iii)
the incidental costs to the company, limited liability partnership, trust body or co-operative society of making the disposal; and
(b)
thereafter, by deducting therefrom the amount or value of the consideration for the acquisition of the capital asset (together with the incidental costs to the company, limited liability partnership, trust body or co-operative society of the acquisition) less—
(i)
any sum received by the company, limited liability partnership, trust body or co-operative society by way of compensation for any kind of damage or injury to the asset or for the destruction or dissipation of the asset or for any depreciation or risk of depreciation of the asset;
(ii)
any sum received by the company, limited liability partnership, trust body or co-operative society under a policy of insurance for any kind of damage or injury to or the loss, destruction or depreciation of the asset; and
(iii)
any sum forfeited to the company, limited liability partnership, trust body or co-operative society as a deposit made in connection with an intended transfer of the capital asset.
Act 851
(3)
Subsection (2) shall not apply in ascertaining the chargeable income of a company, limited liability partnership, trust body or co-operative society from the gains or profits from the disposal of capital assets where the company, limited liability partnership, trust body or co-operative society has elected for tax payable to be charged at the rate of two per cent of gross disposal price from the disposal of the capital asset.
(4)
Where—
(a)
the amount ascertained under paragraph (2)(a)
exceeds the amount ascertained under paragraph (2)(b), there is an adjusted income; and
(b)
the amount ascertained under paragraph (2)(a)
is less than the amount ascertained under paragraph (2)(b), there is an adjusted loss.
(5)
The amount of adjusted loss of a company, limited liability partnership, trust body or co-operative society as ascertained in accordance with paragraph (4)(b) shall be allowed only as a deduction to reduce the adjusted income of a company, limited liability partnership, trust body or co-operative society in the subsequent disposal of capital asset in the same basis period for a year of assessment in which the disposal was made.
(6)
Where by reason of an insufficiency or absence of adjusted income in subsequent disposal of capital asset in the same basis period for a year of assessment in which the adjusted loss arose, effect cannot be given or cannot be given in full to subsection (5), the amount of adjusted loss which has not been so allowed (or so much thereof as has not been so allowed for that year) shall be allowed as a deduction to reduce the adjusted income of a company, limited liability partnership, trust body or co-operative society from the disposal of capital asset for a period of ten consecutive years of assessment and that period commences immediately following the relevant year of assessment and any amount or balance of the amount which is not deductible at the end of that period shall be disregarded for the purposes of this Act.
Finance (No. 2)
(7)
The amount of adjusted income of a company, limited liability partnership, trust body or co-operative society as ascertained in accordance with the foregoing subsections shall be treated as the chargeable income of the company, limited liability partnership, trust body or co-operative society from the source of gains or profits from the disposal of capital asset for a year of assessment.
(8)
Notwithstanding subsection (2), the consideration for the acquisition or disposal of a capital asset shall be deemed to be equal to the market value of the capital asset at the time of the disposal—
(a)
where a company, limited liability partnership, trust body or co-operative society acquires or disposes of the capital asset otherwise than by way of a bargain made at arm’s length and, in particular, where the company, limited liability partnership, trust body or co-operative society acquires or disposes of it by way of gift;
(b)
where a company, limited liability partnership, trust body or co-operative society acquires or disposes of the capital asset wholly or partly for a consideration that cannot be valued;
(c)
where a company, limited liability partnership, trust body or co-operative society acquires a capital asset as trustee for the creditors of any person in full or part satisfaction of any debt due from that person or where the company, limited liability partnership, trust body or co-operative society transfers a capital asset as trustee for the creditors of any person to the creditors in full or part satisfaction of any debt due to the creditors;
(d)
where a company, limited liability partnership, trust body or co-operative society acquires or disposes of a capital asset in a transaction for the transfer of a business for a lump sum consideration; or
(e)
where the disposal of the capital asset is a transaction between connected persons.
Act 851
(9)
For the purposes of paragraph (8)(e)—
(a)
a company is connected with another company—
(i)
if the same person has control of both, or a person has control of one and persons connected with him (or he and persons connected with him) have control over the other; or
(ii)
if two or more groups of persons have control of each company and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating
(in one or more cases) a member of either group as replaced by a person with whom he is connected;
(b)
a company is connected with another person if that person has control of it or if that person connected with him together have control of it;
(c)
any two or more persons acting together to secure or exercise control of a company shall be treated in relation to that company as connected with one another and with any person acting on the directions of any of them to secure or exercise control of the company.
(10)
Any reference in subsection (9) to a person being connected with another shall be taken as meaning that they are connected persons.
(11)
Notwithstanding any other provision of this Act, the market value shall be determined by the Director General in the following circumstances where—
(a)
the parties to the disposal of a capital asset are unable to agree on its market value;
(b)
there is only one party to the disposal of a capital asset; or
Finance (No. 2)
(c)
the Director General is of the opinion that the market value of a capital asset as agreed on by the parties to its disposal is incorrect.
(12)
Sections 33 and 34 shall not apply to gains or profits from disposal of a capital asset.
(13)
For the purposes of subsection (2), the incidental costs of the acquisition or disposal of a capital asset shall consist of expenditure wholly and exclusively incurred by the disposer for the purposes of the acquisition or (as the case may be) the disposal, being—
(a)
fees, commission or remuneration paid for the professional services of any valuer, accountant, agent or legal adviser;
(b)
costs of transfer (including stamp duty);
(c)
in the case of an acquisition, the cost of advertising to find a seller; and
(d)
in the case of a disposal, the cost of advertising to find a buyer and costs reasonably incurred for the purposes of this Act in making any valuation or in ascertaining market value.
(14)
Where an asset is disposed of by being exchanged for another asset (whether chargeable or not) the market value of the asset received by the disposer shall be taken as the consideration for the disposal:
Provided that, if the asset received by the disposer has no market value, the Director General may take the market value of the asset disposed of as the consideration for the disposal.
Act 851
Disposal and acquisition of capital asset 65f. (1) Except where this section provides otherwise, a disposal of a capital asset shall be deemed to take place—
(a)
where there is a written agreement for the disposal of the capital asset, on the date of such agreement;
or
(b)
where there is no written agreement, on the date of the completion of the disposal of the capital asset.
(2)
Except where this section provides otherwise, where there is a disposal of a capital asset, the date of acquisition of the capital asset by the person which acquires the capital asset (in this section referred to as “acquirer”) shall be deemed to coincide with the date of disposal of that capital asset by the person which disposes the capital asset (in this section referred to as “disposer”) to the acquirer.
(3)
For the purposes of this section—
(a)
the date of completion of a disposal means—
(i)
the date on which the ownership of the capital asset disposed of is transferred by the person who disposes the capital asset;
or
(ii)
the date on which the whole of the amount or value of the consideration (in money or money’s worth) for the transfer has been received by the person who disposes the capital asset, whichever is the earlier;
(b)
a transfer of ownership of a capital asset is deemed to take place on the date when the last of all such things shall have been done under any written law as are necessary for the transfer of ownership of the capital asset.
Finance (No. 2)
(4)
Where a contract for the disposal of a capital 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 capital asset shall be regarded as taking place at the time the contract was made, unless—
(a)
the acquisition or disposal requires the approval by the Government or a State Government, the date of disposal shall be the date of such approval; or
(b)
the approval referred to in paragraph (a) is conditional, the date of disposal shall be the date when the last of all such conditions is satisfied.
(5)
Where a capital asset is acquired by a company, limited liability partnership, trust body or co-operative society
(hereinafter referred to as “the acquirer”) with a financing facility provided by an Islamic bank in accordance with the
Syariah, the acquisition price of the capital asset shall be the amount or value of the consideration given by or on behalf of the acquirer to the person disposing that asset other than such
Islamic bank or in the case where the capital asset is owned by such bank, the amount or value of the consideration given to the bank, for the acquisition of the capital asset (together with the incidental costs to him of the acquisition) less the sum of the kind referred to in subparagraph 65e(2)(b)(i), (ii)
or (iii) received by or forfeited, as the case may be, to that acquirer.
(6)
Notwithstanding any other provisions of this Act—
(a)
if a capital asset acquired or held by a company, limited liability partnership, trust body or co-operative society is taken into the trading stock of the company, limited liability partnership, trust body or co-operative society, there shall be deemed to be a disposal of the capital asset on the date that capital asset is taken into the trading stock; and
(b)
the amount or value of the consideration in money or money’s worth of the capital asset shall be equal to the market value on the date the capital asset is taken into the trading stock.
Act 851
(7)
There is a part disposal of a capital asset where, on a person making a disposal, any description of property derived from the capital asset remains undisposed of.
(8)
Subject to other provisions of this Act, where at any time the owner of a capital asset disposes of a part of that capital asset, whenever necessary, the amount or value of consideration for acquisition of the capital asset if the capital asset had been disposed of at that time shall each be apportioned between that part of the capital asset and the remainder thereof on whatever basis is most appropriate, and so much of that price and of those amounts as are so apportioned to the part of the capital asset disposed of shall be taken in applying subsection 65e(2) to the acquisition and disposal of that part.”.
Amendment of section 77a