Malaysia legislation
Section 10
Section 10
The principal Act is amended by inserting after section 17b the following sections:
“Power to disregard certain transactions 17c. (1) The Director General may, without prejudice to such validity as it may have in any other respect or for any other purpose, disregard or vary the transaction and make such adjustments as he thinks fit, including the computation or re-computation of the chargeable profit, or the imposition of liability to tax, or make such assessment or additional assessment in respect of any person as may be necessary in consequence of his exercise of the powers, with a view to counteracting the whole or any part of any such direct or indirect effect of the transaction, where he has reason to believe that any transaction has the direct or indirect effect of—
(a)
altering the incidence of tax which is payable or suffered by or which would otherwise have been payable by any person or suffered by any person;
Labuan Business Activity Tax (Amendment)
(b)
relieving any person from any liability which has arisen or which would otherwise have arisen to pay tax or to make a return;
(c)
evading or avoiding any duty or liability which is imposed or would otherwise have been imposed on any person by this Act; or
(d)
hindering or preventing the operation of this Act in any respect.
(2)
In exercising his powers under this section, the Director
General may require by notice any person to pay to him within the time specified in the notice the amount of tax that would be deducted by that person under this Act in consequence of his exercise of those powers.
(3)
Without prejudice to the generality of subsections (1)
and (2), the powers of the Director General conferred by this section shall extend—
(a)
to the charging with tax of any person or persons who if not for any adjustment made by virtue of this section would not be chargeable with tax or would not be chargeable with tax to the same extent; and
(b)
to the charging of a greater amount of tax than would be chargeable if not for any such adjustment.
(4)
Where in consequence of any adjustment made under this section an assessment is made, a right to repayment is refused or a return of a repayment of tax is required, the particulars of the adjustment shall be given with the notice of assessment, with the notice refusing the repayment or with the notice requiring the return of a repayment, as the case may be.
(5)
Transactions—
(a)
between persons one of whom has control over the other; or
(b)
between persons both of whom are controlled by some other person,
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shall be deemed to be transactions of the kind to which subsection (1) applies if in the opinion of the Director General those transactions have not been made on terms which might fairly be expected to have been made by independent persons engaged in the same or similar activities dealing with one another at arm’s length.
(6)
For the purposes of this section—
(a)
a person shall be taken to have control over the other in the same manner as provided under section 139
of the Income Tax Act 1967 as far as it is applicable and with the necessary modifications; and
(b)
“transaction” means any trust, grant, covenant, agreement, arrangement or other disposition or transaction made or entered into orally or in writing, whether before or after the commencement of this
Act, and includes a transaction entered into by two or more persons with another person or persons.
Power to substitute the price on certain transactions 17d. (1) This section shall apply notwithstanding section 17c and subject to any regulations prescribed under this Act.
(2)
Subject to subsection (3), where a person in the basis period for a year of assessment enters into a transaction with an associated person for that year for the acquisition or supply of property or services, then, for all purposes of this
Act, that person shall determine and apply the arm’s length price for such acquisition or supply.
(3)
Where the Director General has reason to believe that any property or services referred to in subsection (2) is acquired or supplied at a price which is either less than or greater than the price which it might have been expected to fetch if the parties to the transaction had been independent persons dealing at arm’s length, the Director General may in the determination of the chargeable profit of the person, substitute the price in respect of the transaction to reflect an arm’s length price for the transaction.
Labuan Business Activity Tax (Amendment)
(4)
The transactions referred to in subsection (2) shall be construed as a transaction between—
(a)
persons one of whom has control over the other; or
(b)
persons both of whom are controlled by some other person, in this section referred to as “third person”.
(5)
Without prejudice to the generality of paragraph 17c(6)(a), for the purpose of subsection (4), “control” refers to persons one of whom owns shares of the other person, or a third person who owns shares of both persons, where the percentage of the share capital held in either situation is twenty per cent or more and—
(a)
the business operations of that person depends on the proprietary rights, such as patents, non-patented technological know-how, trademarks or copyrights, provided by the other person or a third person;
(b)
the business activities, such as purchases, sales, receipt of services, provision of services, of that person are specified by the other person, and the prices and other conditions relating to the supply are influenced by such other person or a third person;
or
(c)
where one or more of the directors or members of the board of directors of a person are appointed by the other person or a third person.
(6)
In this section, “transaction” has the same meaning assigned to it under paragraph 17c(6)(b).”.
New sections 22b, 22c, 22d, 22e and 22f