FINANCE ACT 2014

Sections 6, 20, 23, 24, 27, 28, 29, 31 and 32 come into operation on the coming into operation of this Act.

amendment of section 2

by inserting after the definition of “co-operative society”

the following definition:

‘ “deferred annuity” means deferred annuity contracted on or after 1 January 2014 issued by insurers licensed under the Financial Services Act 2013 [Act 758] or takaful operators registered under the islamic Financial

Services Act 2013 [Act 759], and contains the Retirement

Saving Standards approved by the central Bank;’;

by inserting after the definition of “partnership” the following definition:

‘ “permanent total disablement” has the same meaning assigned to it in the Employees’ Social Security Act 1969 [Act 4];’; and

by inserting after the definition of “Securities commission”

the following definition:

‘ “serious disease” means acquired immunity deficiency syndrome, Parkinson’s disease, cancer, renal failure, leukaemia or other similar diseases;’.

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new section 4c

in subsection (3), by substituting for the words “other than 31 December” the words “in a basis year”; and

by substituting for subsection (4) the following subsection:

“(4) Subject to subsections (5) and (6), where a company, limited liability partnership, trust body or co-operative society commences operation on a day in a basis year for a year of assessment (hereinafter referred to as the “first year of assessment”) and makes up its account—

for a period of less than twelve months ending on a day in that basis year, that period shall constitute the basis period for the first year of assessment;

for any period of months ending on a day in the immediately following basis year (hereinafter referred to as the “second basis year”), that period shall constitute the basis period for the year of assessment (hereinafter referred to as the “second year of assessment”) immediately following the first year of assessment, there shall be no basis period in relation to any of its sources of income for the first year of assessment; or

for a period of more than twelve months ending on a day in the basis year immediately following the second basis year, that period shall constitute the basis period for the year of assessment immediately following the second year of assessment and there shall be no basis period in relation to any of its sources of income for the first year of assessment and the second year of assessment.”.

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amendment of section 24

in paragraph (a), by deleting the words “(or parted with on requisition or compulsory acquisition or in similar manner)”; and

by inserting after paragraph (a), the following paragraph:

“(aa) any stock in trade parted with by any element of compulsion including on requisition or compulsory acquisition or in a similar manner, in or before the relevant period;”.

amendment of section 29

between persons one of whom has control over the other; or

between persons both of whom are controlled by some other person, the relevant person is deemed to be able to obtain on demand the receipt of such interest when such interest is due to be paid to the relevant person in the relevant period.”.

amendment of section 33

in subparagraph (c)(i), by inserting after the word

“improvement” the words “, purchase”;

in subsubparagraph (c)(i)(A), by inserting after the word

“constructed” the words “or purchased”; and

in subsubparagraph (c)(i)(B), by inserting after the word

“constructed” the words “or purchased”.

amendment of section 46

in paragraph (1d)(a), by substituting for the words “any deferred annuity” the words “premium for deferred annuity”; and

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in subsection (3), by inserting after the words “subsection (1)”

the words “and (1d)”.

amendment of section 60AA

in subparagraph (5)(b)(vi), by deleting the word “and”

at the end of that subparagraph;

in subparagraph (5)(b)(vii), by substituting for the full stop at the end of that subparagraph the words “; and”;

by inserting after subparagraph (5)(b)(vii) the following subparagraph:

“(viii) management expenses incurred by him in that period in connection with his general business.”;

in subparagraph (7)(b)(vi), by deleting the word “and”

at the end of that subparagraph;

in subparagraph (7)(b)(vii), by substituting for the full stop at the end of that subparagraph the words “; and”;

by inserting after subparagraph (7)(b)(vii) the following subparagraph:

“(viii) management expenses incurred by him in that period in connection with his general business.”;

in subparagraph (9)(b)(ii), by deleting the word “and” at the end of that subparagraph;

in subparagraph (9)(b)(iii), by substituting for the full stop at the end of that subparagraph the words “; and”;

by inserting after subparagraph (9)(b)(iii) the following subparagraph:

“(iv) commission payable and discounts allowed by him in that period in connection with his general business.”;

in subparagraph (10)(b)(ii), by deleting the word “and”

at the end of that subparagraph;

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in subparagraph (10)(b)(iii), by substituting for the full stop at the end of that subparagraph the words “; and”; and

by inserting after subparagraph (10)(b)(iii) the following subparagraph:

“(iv) commission payable and discounts allowed by him in that period in connection with his general business.”.

amendment of section 60f

by inserting after subsection (1) the following subsection:

“(1a) For the purposes of this section, a company shall furnish to the Director General a return in the prescribed form on an electronic medium or by way of electronic transmission in accordance with section 152a.”; and

by inserting after subsection (3) the following subsection:

“(4) The return furnished by a company under this section shall be based on accounts audited by a professional accountant, together with a report made by that accountant which shall contain, in so far as they are relevant, the matters set out in subsections 174(1) and (2) of the companies Act 1965.”.

new section 77c

has income only in respect of gains or profits from an employment other than gains or profits in respect of the use or enjoyment of benefits provided by his employer under paragraph 13(1)(b) or (1)(c);

deductions have been made by his employer in accordance with subsection 107(2) in respect of such gains or profits;

the individual is employed by the same employer for a period of twelve months in that year of assessment;

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such deductions are not borne by his employer for that year of assessment; and

that individual whose husband or wife has not made an election pursuant to section 45, the individual may elect not to furnish a return for a year of assessment to the Director General in accordance with section 77.

Where subsection (1) applies and no return for a year of assessment has been furnished by an individual in accordance with section 77—

Notwithstanding subsections (1) and (2), the Director

General shall have the power to make an assessment under subsection 90(3) or section 91 for any year of assessment and where an assessment is made by the Director General, the amount which is deemed to be the tax payable under paragraph (2)(b) shall be disregarded.”.

amendment of section 99

in subsection (1), by substituting for the words “subsection (3)”

the words “subsection (1a) or (3)”; and

by inserting after subsection (1) the following subsection:

“(1a) Where a person has made an application to invoke a mutual agreement procedure pursuant to an arrangement made under section 132 and the ground in which the application is made is similar with the appeal filed under this Act—

no appeal shall be sent forward to the Special commissioners until the determination of the mutual agreement procedure;

the person may within thirty days from the determination of the mutual agreement procedure request to the Director General in writing to forward such appeal to the Special commissioners; and

the Director General shall within three months after receiving the request send the appeal forward to the Special commissioners.”.

amendment of section 107c

in paragraph (a), by deleting the word “or” at the end of that paragraph;

in the proviso to paragraph (b), by substituting for the full stop at the end of that proviso the words “; or”;

and

by inserting after paragraph (b) the following paragraph:

“(c) where the company has no basis period for that year of assessment and for the immediate following year

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of assessment, for that year of assessment and the immediate two following years of assessment:

Provided that at the commencement of the operation and at the beginning of the immediate two following years of assessment the paid up capital of the company in respect of ordinary shares is two million five hundred thousand ringgit and less.”.

amendment of section 109e

amendment of section 109g

in the shoulder note, by substituting for the words

“contribution made to” the words “a deferred annuity or”;

by substituting for subsection (1) the following subsection:

“(1) Where a person (in this section referred to as “the payer”) makes payment to an individual (in this section referred to as “the recipient”) in relation to a withdrawal from a deferred annuity or a private retirement scheme before reaching the age of fifty-five

(other than by reason of permanent total disablement, serious disease, mental disability, death or permanently leaving Malaysia) from a fund administered by that payer under a deferred annuity scheme or a private retirement scheme, the payer shall upon paying the amount, deduct from that amount, tax at a rate applicable to such payment, and (whether or not tax is so deducted) shall within one month after paying the amount render an account and pay the amount of that tax to the Director General:

Provided that the Director General may under special circumstances allow extension of time for the amount of tax deducted to be paid over.”; and

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by substituting for subsection (5) the following subsection:

“(5) in this section, “payer” refers to—

in the case of a deferred annuity, a life insurer or takaful operator licensed under the Financial Services Act 2013 or the islamic Financial Services Act 2013; or

in the case of a private retirement scheme, a private retirement scheme provider as approved under section 139q of the capital Markets and Services Act 2007 to provide and manage a private retirement scheme.”.

new section 132b

arrangements specified in the order have been made by the Government with the government of any territory outside Malaysia with a view to the mutual administrative assistance in tax matters which includes simultaneous tax examinations, automatic exchange of information or tax administrations abroad; and

it is expedient that those arrangements should have effect, then, so long as the order remains in force, notwithstanding anything in any written law, those arrangements shall have effect in relation to tax under this Act or other taxes of every kind under written law.

Any order made under this section shall be laid before the Dewan Rakyat.”.

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amendment of section 140

For the purposes of subsection (1), the interest for the basis period for that year of assessment shall be the aggregate sum of interest for all calendar months in the basis period and the sum of interest for each calendar month shall be determined in accordance with the following formula:

1 x A x B

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where

A is the total amount of loan or advances outstanding at the end of the calendar month;

and

B is the average lending rate of commercial banks published by the central Bank at the end of the calendar month or where there is no such average lending rate, such other reference lending rate as may be prescribed by the Director General.

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Where in respect of a loan or advances referred to under subsection (1), interest is charged by the company and the total amount of interest charged and payable by the director to that company for the basis period for a year of assessment—

For the purposes of this Act, “director” has the same meaning assigned to it under subsection 75a(2).”.

amendment of schedule 1

by inserting after paragraph 38a the following paragraph:

“38b. Paragraphs 39 and 40 shall apply where a partnership or a company is converted into a limited liability partnership in accordance with section 29 or 30 of the Limited Liability

Partnerships Act 2012 and the partnership or that company disposes of an asset to that limited liability partnership in relation to which an initial or annual allowance has been made or would have been made, if claimed by the partnership or the company.”;

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in paragraph 40, by inserting after the words “38a,” the words “38b,”; and

by inserting after paragraph 76 the following paragraph:

“76A. Where in a year of assessment a partnership or a company is converted into a limited liability partnership in accordance with section 29 or 30 of the Limited Liability

Partnerships Act 2012, the limited liability partnership shall not be entitled to an allowance under this Schedule in relation to an asset which is transferred to that limited liability partnership for that year of assessment unless for that year of assessment no allowance in relation to that asset has been claimed by the partners of that partnership or that company in accordance with paragraph 77.”.

Sections 39 and 41 come into operation on the coming into operation of this Act.

amendment of section 2

in subsection (1), by inserting after the words “Subject to subsection” the words “(1a) or”; and

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by inserting after subsection (1) the following subsection:

“(1a) Where a person has made an application to invoke a mutual agreement procedure pursuant to an arrangement under section 65a and the ground in which the application is made is similar with the appeal filed under this Act—

no appeal shall be sent forward to the Special commissioners until the determination of the mutual agreement procedure;

the person may within thirty days from the determination of the mutual agreement procedure request to the Director General in writing to forward such appeal to the Special commissioners; and

the Director General shall within three months after receiving the request send the appeal forward to the Special commissioners.”.

new chapter 1A

the Director General may enter into an advance pricing arrangement with that chargeable person; or

in the case where section 65a applies, the competent authorities may enter into an advance pricing arrangement,

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in order to determine the transfer pricing methodology to be used in any future apportionment or allocation of income or deduction to ensure the arm’s length transfer prices in relation to that transaction.

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

The transactions referred to in subsection (1) shall be construed as a transaction between—

in this section, “transaction” has the same meaning assigned to it under subsection 72(7).

in the case of a petroleum agreement, chargeable person referred to under subsection (1) shall refer to the person in that agreement that enters into a transaction with another company where it has control in accordance with subsection (3).”.

amendment of section 72A

in subparagraph (1), by substituting for the proviso to that paragraph the following proviso:

“Provided that—

the original parties to the petroleum agreement are the same; and

the amount of qualifying exploration expenditure of the first mentioned chargeable person is from an agreement area where chargeable petroleum is not being produced.”;

and

by substituting for subparagraph (2) the following subparagraph:

“(2) The amount of qualifying exploration expenditure incurred by the first-mentioned chargeable person to be allowed as deduction against the gross income of the second-mentioned chargeable person shall be determined in accordance with the following formula:

A x c

B where

A is the gross income of the second-mentioned chargeable person from a petroleum operation;

B is the total gross income of the second-mentioned chargeable person from petroleum operations;

and c is the qualifying exploration expenditure;

and in the case where the qualifying exploration expenditure exceeds the amount of gross income of petroleum operations or the gross income in respect of a petroleum operation of the second-mentioned chargeable person, the excess of the expenditure shall be allowed to be deducted from the gross income of that petroleum operations for the subsequent years of assessment of the second-mentioned chargeable person and any excess thereof shall not be used by another chargeable person in another petroleum agreement where the original parties to the petroleum agreement are the same.”.

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Section 49 shall have effect from 1 January 2014.

amendment of section 14

in Part i, in the column “category of disposal”—

in item no. 1, by substituting for the word “two”

the word “three”;

in Part i, in the column “Rate of tax” in item no. 4, by substituting for the words “5 per cent” the word “Nil”; and

in Part ii, in the column “category of disposal”—

in item no. 1, by substituting for the word “two”

the word “three”;