Finance Act 2007 · s 15
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Open the official texts 15Amendment of section 60aa
The principal Act is amended by substituting for section 60aa the following section:
“Takaful business 60aa. (1) This section shall apply for ascertaining the adjusted income for the basis period for a year of assessment from the takaful business of an operator.
For the purposes of this section—
subject to paragraph (b), where an operator carries on family solidarity business (in this section referred to as “family business”) in conjunction with general business, the family business and the general business shall be treated as separate takaful businesses;
where an operator carries on—
an inward re-takaful business, the inward re-takaful business and general business
(excluding the inward re-takaful business and offshore takaful business) shall be treated as separate general businesses; and
an offshore takaful business, the offshore takaful business and the general business
(excluding the offshore takaful business and inward re-takaful business) shall be treated as separate general businesses;
where an operator carries on family business, the income of the fund established in respect of that business (in this section referred to as “family fund”)
shall be treated as a separate source of income from the income of the shareholders’ fund in respect of the family business:
Provided that—
where the operator also carries on family solidarity re-takaful business, the family solidarity re-takaful business shall be a separate source from family business and shall be treated as a general business; or
where the operator also carries on inward family solidarity re-takaful business, the inward family solidarity re-takaful business shall be a separate source from family business and shall be treated as a general business;
where an operator carries on only family solidarity re-takaful business, that business shall be treated as a general business; and
where an operator carries on inward re-takaful business, offshore takaful business, family solidarity re-takaful business or general business (excluding those businesses), the income of the fund established in respect of each of the businesses (in this section referred to as “inward re-takaful fund”, “offshore fund”, “family re-takaful fund” and “general fund”
respectively) shall be treated as a separate source of income from the income of the shareholders’ fund in respect of those businesses.
The adjusted income of the family fund, other than income arising from family solidarity re-takaful business, for the basis period for a year of assessment of an operator resident for the basis year for that year of assessment shall be ascertained by—
taking the aggregate of—
the amount of gross income for that period from the investments made out of any of the operator’s family funds; and
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the amount of any gross proceeds (whether or not of an income nature) which are not gross income to which subparagraph (i)
applies and which are first receivable in that period in connection with the realization of the investments or any right arising from them; and
deducting from that aggregate—
where subparagraph (a)(ii) is applicable for that period to gross proceeds receivable in connection with any investment or right, the cost of acquiring and realizing the investments or rights; and
the proportion of profits from investments distributed or credited to the participant or to the shareholders’ fund for that period out of any of the operator’s family funds.
The adjusted income of the family fund, other than income arising from family solidarity re-takaful business, for the basis period for a year of assessment of an operator not resident for the basis year for that year of assessment shall, where that business is wholly or partly carried on in
Malaysia, be ascertained by—
taking the aggregate of—
the amount of gross income for that period from the investments made (in Malaysia or elsewhere) out of the operator’s Malaysian family funds; and
the amount of any gross proceeds (whether or not of an income nature) which are not gross income to which subparagraph (i)
applies and which are first receivable in that period in connection with the realization of the investments or any right arising from them; and
deducting from that aggregate—
where subparagraph (a)(ii) is applicable for that period to gross proceeds receivable in connection with any investment or right, the cost of acquiring and realizing the investments or rights; and
the proportion of profits from investments distributed or credited to the participant or to the shareholders’ fund for that period out of any of the operator’s Malaysian family funds.
The adjusted income of the general fund in respect of general business for the basis period for a year of assessment of an operator resident for the basis year for that year of assessment shall be ascertained by—
taking the aggregate of—
the amount of the gross contributions first receivable in that period in respect of general certificate, issued by him (less the amount of any contribution or contract received at any time in respect of such certificate or contract and returned by him during the period and the amount of wakalah fee which is attributable to the shareholders’ fund);
the amount of any other gross income for that period from that business (including any commission and any profit from investment held in connection with that business);
the amount of any gross proceeds (whether or not of an income nature) which are not gross income to which subparagraph (ii)
applies and which are first receivable in that period in connection with the realization of the investments or any right arising from them;
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any amount recovered or recoverable by him in that period under re-takaful contracts made in connection with that business; and
the amount of his reserve fund for unexpired risks at the end of the immediately preceding basis period; and
subject to subsection (12), by deducting from that aggregate the amount of—
claims incurred in that period in connection with his general certificate;
re-takaful contributions payable by him in that period in connection with that business;
commissions payable and discounts allowed by him in that period in connection with that business;
his reserve fund for unexpired risks at the end of that period;
where subparagraph (a)(iii) is applicable for that period to gross proceeds receivable in connection with any investment or right, the cost of acquiring and realizing the investments or rights;
any fee other than wakalah fee attributable to the shareholders’ fund; and
any share of profits distributed or credited to the participant or shareholders’ fund for that period out of any of the operator’s general fund.
The adjusted income of the inward re-takaful fund, offshore fund or family re-takaful fund for the basis period for a year of assessment in respect of inward re-takaful business, offshore takaful business or family solidarity re-takaful business respectively of an operator resident for the
basis year for that year of assessment shall consist of an amount arrived at by applying subsection (5) and references in that subsection to—
“general certificate” shall be construed as references to “inward re-takaful contract”, “offshore takaful certificate” or “family solidarity re-takaful certificate”, as the case may be;
“general business” shall be construed as references to “inward re-takaful business”, “offshore takaful business” or “family solidarity re-takaful business”, as the case may be; and
“reserve fund for unexpired risks” and “operator”
shall in the case of family solidarity re-takaful business be construed as references to “actuarial valuation reserve” and “family solidarity operator”
respectively:
Provided that in the case of inward re-takaful business or offshore takaful business, no deduction shall be allowed on any share of profits distributed or credited to the participant or shareholders’ fund for that period out of any of the operator’s inward fund or offshore fund, as the case may be.
The adjusted income of the general fund in respect of general business for the basis period for a year of assessment of an operator not resident for the basis year for that year of assessment shall, where that business is wholly or partly carried on in Malaysia be ascertained by—
taking the aggregate of—
the amount of the gross contribution first receivable in that period in respect of
Malaysian general certificate or contract, issued by him (less the amount of any contribution received at any time in respect of such certificate or contract and returned by him during the period and the amount of wakalah fee which is attributable to the shareholders’ fund);
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the amount of any other gross income for that period derived from Malaysia from that business (including any commission and any profit from investment, wherever made, held in connection with that business);
the amount of any gross proceeds (whether or not of an income nature) which are not gross income to which subparagraph (ii)
applies and which are first receivable in that period in connection with the realization of the investments or any right arising from them;
any amount recovered or recoverable by him in that period under re-takaful contracts made in connection with Malaysian general certificate of that business; and
the amount of his reserve fund for unexpired risks relating to any such Malaysian general certificate at the end of the immediately preceding basis period; and
subject to subsection (12), by deducting from that aggregate the amount of—
claims incurred in that period in connection with his Malaysian general certificate;
re-takaful contributions payable by him in that period in connection with any such
Malaysian general certificate;
commissions payable and discounts allowed by him in that period in connection with any such Malaysian general certificate;
his reserve fund for unexpired risks relating to any such Malaysian general certificate at the end of that period;
where subparagraph (a)(iii) is applicable for that period to gross proceeds receivable in connection with any investment or right, the cost of acquiring and realizing the investment or right;
any fee other than wakalah fee attributable to the shareholders’ fund; and
any share of profits distributed or credited to the participant or to the shareholders’ fund for that period out of any of the operator’s
Malaysian general fund.
The adjusted income of the inward re-takaful fund, offshore fund or family re-takaful fund for the basis period for a year of assessment in respect of inward re-takaful business, offshore takaful business or family solidarity re-takaful business respectively of an operator not resident for the basis year for that year of assessment shall, where that business is wholly or partly carried on in Malaysia, consist of an amount arrived at by applying subsection (7) and references in that subsection to—
“Malaysian general certificate” shall be construed as references to “inward re-takaful contract”, “offshore takaful certificate” or “Malaysian family solidarity re-takaful certificate”, as the case may be;
“general business” shall be construed as references to “inward re-takaful business”, “offshore takaful business” or “family solidarity re-takaful business”, as the case may be; and
“reserve fund for unexpired risks” and “operator” shall in the case of family solidarity re-takaful business be construed as references to “actuarial valuation reserve” and “family solidarity operator” respectively:
Provided that in the case of inward re-takaful business or offshore takaful business, no deduction shall be allowed on any share of profits distributed or credited to the participant or shareholders’ fund for that period out of any of the operator’s inward fund or offshore fund, as the case may be.
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The adjusted income of the shareholders’ fund, for the basis period for a year of assessment of an operator resident for the basis year for that year of assessment shall be ascertained by—
taking the aggregate of—
the amount of gross income for that period from the investments made by the operator out of any of the shareholders’ funds;
the amount of any gross proceeds (whether or not of an income nature) which are not gross income to which subparagraph (i)
applies and which are first receivable in that period in connection with the realization of the investments or any right arising from them;
the amount of gross income for that period in respect of wakalah fee or any other fee receivable in connection with the family fund, general fund, inward re-takaful fund, offshore fund or family re-takaful fund;
any amount of qard recovered by him in that period in connection with the family fund;
and
the amount of gross income for that period in respect of profits from investments distributed or credited from family fund, or in respect of profits distributed or credited from general fund or family re-takaful fund;
and
deducting from that aggregate—
where subparagraph (a)(ii) is applicable for that period to gross proceeds receivable in connection with any investment or right, the cost of acquiring and realizing the investments or rights;
so much of the amount of qard incurred in that period in connection with the family fund; and
the amount of management expenses incurred by him in that period in connection with his family and general businesses.
The adjusted income of the shareholders’ fund, for the basis period for a year of assessment of an operator not resident for the basis year for that year of assessment shall, where that business is wholly or partly carried on in Malaysia be ascertained by—
taking the aggregate of—
the amount of gross income for that period from the investments made by the operator out of any of the shareholders’ funds;
the amount of any gross proceeds (whether or not of an income nature) which are not gross income to which subparagraph (i)
applies and which are first receivable in that period in connection with the realization of the investments or any right arising from them;
the amount of gross income for that period in respect of wakalah fee or any other fee receivable in connection with the family fund, general fund, inward re-takaful fund, offshore fund or family re-takaful fund;
any amount of qard recovered by him in that period in connection with the family fund;
and
the amount of gross income for that period in respect of profits from investments distributed or credited from family fund, or in respect of profits distributed or credited from general fund or family re-takaful fund;
and
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deducting from that aggregate—
where subparagraph (a)(ii) is applicable for that period to gross proceeds receivable in connection with any investment or right, the cost of acquiring and realizing the investments or rights;
so much of the amount of qard incurred in that period in connection with the family fund; and
the amount of management expenses incurred by him in that period in connection with his family and general businesses.
The adjusted income as ascertained under subsections (9)
and (10) shall be deemed to be the statutory income from that source.
Where an operator carrying on general business has re-takaful the risks or part of the risks with a re-takaful operator who either does not carry on the business of takaful of that kind in Malaysia or does not re-takaful the risks through a branch in Malaysia, there may be deducted under subparagraph (5)(b)(ii) or (7)(b)(ii) in respect of such risks which are re-takaful only ninety-five per cent of the amount which would otherwise be deductible:
Provided that in the case where subsection (7) or (8) apply
(other than in the case of family solidarity re-takaful business), the operator may elect that no deductions shall be made under subparagraph (7)(b)(ii) and if he does so—
the election shall be irrevocable and shall apply in relation to the basis period for the year of assessment for which it is made and for the basis periods for all subsequent years of assessment; and
amounts recoverable under re-takaful contracts shall be disregarded for the purposes of subparagraph (7)(a)(iv).
Where an operator in connection with his family business or his general business receives any incidental gross income (not being a contribution on a certificate issued in the course of carrying on that family or general business)
for which subsections (3) to (10) and subsection (12) do not provide, that income shall be treated as income of the operator falling under paragraph 4(f) and he shall be deemed to have a separate source in respect of it.
Where under this section all such deductions as would be made in computing what would have been the adjusted income for the basis period for a year of assessment from takaful business of an operator if any such adjustment income had been ascertainable exceed the aggregate of the amounts from which those deductions would otherwise have been made, the amount of the excess shall be taken to be the amount of his adjusted loss from that business for that period.
Notwithstanding subsection (14) and subsection 43(2), any unabsorbed losses of the family fund shall only be available for deduction against the statutory income for the basis period for a year of assessment and subsequent years of assessment in respect of the family fund of the operator.
Notwithstanding paragraph 75 of Schedule 3, any unabsorbed allowances of the family fund shall only be available for deduction against the adjusted income for the basis period for a year of assessment and subsequent years of assessment in respect of the family fund of the operator.
Allowances under Schedule 3 shall only be available for deduction against the adjusted income of the family fund and the balance of such allowances shall not be available as a deduction against the adjusted income of the shareholders’
fund.
Any income which is distributed or credited to a participant under this section shall be deemed to be derived from Malaysia.
The chargeable income in respect of the family fund as determined under subsections (3) and (4) is subject to tax as specified under Part XII of Schedule 1.
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Where an operator carries on inward re-takaful business or offshore takaful business in conjunction with other takaful businesses, the part of the chargeable income for a year of assessment which is attributable to that inward re-takaful business or offshore takaful business shall consist of an amount which bears the same proportion to the chargeable income for that year of assessment of the operator as the part of the aggregate income which relates to the inward re-takaful business or offshore takaful business bears to the whole of the aggregate income for that year of assessment from all sources of the operator.
The amount arrived at under subsection (20) shall be treated as his chargeable income for a year of assessment of an operator from inward re-takaful business or offshore takaful business for the purposes of paragraph 4 of Part I of Schedule 1.
As soon as any amount of chargeable income from the inward re-takaful business or offshore takaful business of an operator, being a company resident for the basis year for a year of assessment, has been subject to income tax at the rate of five per cent—
the net amount of that income (after deduction of such tax) shall be credited to an account (that account and company being referred to as the exempt account and the relevant company respectively); and
paragraph 5 (except subparagraph (1) thereof) and paragraph 6 of Schedule 7a shall apply as if any reference in those paragraphs to any income exempted or which has become exempt under paragraph 3
were a reference to income credited to the exempt account.
In this section—
“contribution” means takaful instalment payable by participants;
“family solidarity” means takaful business for the benefit of the individual and his family;
“general business” means any takaful business which is not family business;
“general certificate” means a certificate other than a family solidarity certificate;
“investment” includes any accretions thereto;
“inward re-takaful” means any re-takaful of a risk under a certificate where the risk is outside Malaysia and the original takaful certificate—
is issued by an operator not resident in Malaysia and not by a branch in Malaysia of such operator; or
is issued by a branch outside Malaysia of an operator resident in Malaysia, and where any risk is in transit in Malaysia it shall be deemed to be outside Malaysia;
“inward re-takaful contract” means a Malaysian certificate in respect of inward re-takaful;
“Malaysian certificate” means any Malaysian certificate entered in the Register established by the operator pursuant to section 15 of the Takaful Act 1984;
“Malaysian family solidarity fund” means the fund in respect of Malaysian family certificate;
“offshore takaful” means takaful of a risk under a certificate where the risk is outside Malaysia and the takaful certificate is issued by a takaful operator resident in Malaysia or by a branch in Malaysia of a takaful operator not resident in
Malaysia, and where any risk is in transit in Malaysia it shall be deemed to be outside Malaysia;
“operator” means a company which carries on takaful business, including a company that solely carries on re-takaful business;
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“participant” includes, where a certificate has been assigned, the assignee for the time being and, where he is entitled as against the operator to the benefit of the certificate, the personal representative of a deceased participant;
“qard” means a benevolent loan made from the shareholders’
fund to the family fund to fulfill a short term financial need of the family fund which shall be repaid by the family fund;
“re-takaful” has the same meaning assigned to it under section 2 of the Takaful Act 1984;
“takaful” has the same meaning assigned to it under section 2 of the Takaful Act 1984;
“takaful business” has the same meaning assigned to it under section 2 of the Takaful Act 1984;
“takaful certificate” includes any contract of takaful for family solidarity business or general business whether or not embodied in or evidenced by an instrument in the form of a certificate, and references to issuing a certificate shall be construed accordingly;
“wakalah fee” means a fee in respect of a contract which gives the power to a person to nominate another person to act on his behalf based on agreed terms and conditions.
For the purpose of this section, an operator’s reserve fund for unexpired risks at the end of a basis period shall consist of—
twenty-five per cent of the difference between the gross contributions first receivable by him in that period in respect of marine, aviation or transit certificates issued by him and the amount deducted under subparagraph (5)(b)(ii) or (7)(b)(ii); and
an amount calculated based on the method of computation as determined by the relevant authority regulating the takaful industry and which is consistently applied to contributions first receivable by him in that period in respect of other general certificates issued by him less the amount deducted under subparagraph (5)(b)(ii) or (7)(b)(ii).”.