Commencement of amendments to the Income Tax Act 1967
(1) Sections 4, 5, 6, 13, 15, 16, 17, 23 and 27, and subparagraphs 14(a)(i), (ii), (iii), (iv) and (v), subparagraph 14(a)(viii) and paragraph 14(b) in relation to paragraph 46(1)(u) of the Income Tax Act 1967, and paragraph 28(a) have effect for the year of assessment 2021 and subsequent years of assessment.
(2) Sections 7, 8 and 9 come into operation on the coming into operation of this Act.
(3) Sections 10, 11, 18, 20, 21, 24, 25 and 26, and paragraph 28(b) come into operation on 1 January 2021.
(4) Section 12 has effect for the year of assessment 2022 and subsequent years of assessment.
(5) Subparagraphs 14(a)(vi) and (vii), subparagraph 14(a)(viii) in relation to paragraph 46(1)(s) of the Income Tax Act 1967, paragraph 14(b) in relation to paragraphs 46(1)(r) and (s) of the Income Tax Act 1967, and section 29 have effect for the years of assessment 2020 and 2021.
(6) Subparagraph 14(a)(viii) and paragraph 14(b) in relation to paragraph 46(1)(t) of the Income Tax Act 1967 have effect for the year of assessment 2020.
(7) Sections 19 and 22 are deemed to have come into operation on 1 January 2020.
(8) Section 30 has effect for the years of assessment 2020, 2021 and 2022.
Amendment of section 5
The Income Tax Act 1967, which is referred to as the “principal Act” in this Chapter, is amended in subsection 5(1a) by inserting after the words “section 109c,” the words “109d,”.
Amendment of section 6
Section 6 of the principal Act is amended—
(a) in subsection (1)—
(i) in paragraph (a), by substituting for the words “section 6a” the words “sections 6a and 6d”;
(ii) in paragraph (l), by substituting for the full stop at the end of that paragraph a semi colon; and
(iii) by inserting after paragraph (l) the following paragraphs:
“(m) income tax shall be charged for each year of assessment upon the chargeable income of a person who carries on business in respect of a qualifying activity under an incentive scheme approved by the Minister at the appropriate rate as specified in Part XVII of Schedule 1;
(n) income tax shall be charged for each year of assessment upon the chargeable income of an individual resident who is not a citizen having and exercising employment in a company which carries on business in respect of a qualifying activity under an incentive scheme approved by the Minister at the appropriate rate as specified in Part XVIII of Schedule 1.”; and
(b) by inserting after subsection (1) the following subsection:
“ ( 1 a ) A n i n c e n t i v e s c h e m e r e f e r r e d t o i n paragraphs (1)(m) and (n) shall be the incentive scheme for a qualifying activity prescribed by the Minister which includes—
(a) any high technology activity in manufacturing and services sector; and
(b) any other activities which would benefit the economy of Malaysia.”.
New section 6d
The principal Act is amended by inserting after the deleted section 6c the following section:
“Tax rebate for company or limited liability partnership
6 d . (1) A rebate may be granted for a period of three consecutive years from the year of assessment in which a company or limited liability partnership first commences operation, in an amount equivalent to its operating or capital expenditure which it has incurred limited to a maximum amount of twenty thousand ringgit for each year of assessment.
(2) Where the total amount of the rebate under subsection (1) exceeds the income tax charged (before any such rebate) for any year of assessment, the excess shall not be paid to the company or limited liability partnership, or be available as credit to set off the tax liability of the company or limited liability partnership for that year of assessment or any subsequent year.
(3) The company or limited liability partnership referred to in subsection (1) shall be a company or limited liability partnership resident and incorporated or registered in Malaysia—
(a) which has a paid-up capital in respect of ordinary shares or contribution of capital (whether in cash or in kind) of two million and five hundred thousand ringgit and less at the beginning of the basis period for a year of assessment;
(b) which has a gross income from source or sources consisting of a business not exceeding fifty million ringgit for the basis period for that year of assessment; and
(c) which has commenced operation on or after 1 July 2020 but not later than 31 December 2021.
(4) The Minister may, by statutory order, impose such conditions as he thinks fit to give effect to or for carrying out the purposes of this section.
(5) Where in a year of assessment the company or limited liability partnership fails to fulfil the conditions specified in subsection (3) or (4), the amount of rebate under subsection (1) shall not be granted for that year of assessment in which the failure occurs and in the subsequent years of assessment.
(6) The statutory order made under subsection (4) shall be laid before the Dewan Rakyat.”.
Amendment of section 34
Subsection 34(7) of the principal Act is amended by inserting after the words “relevant person” the words “resident in Malaysia”.
Amendment of section 34a
Section 34a of the principal Act is amended—
(a) in subsection (1)—
(i) by inserting after the words “a person” the words “resident in Malaysia”; and
(ii) by inserting after the words “by the Minister” the words “and the amount of expenses on research and development incurred during that period outside Malaysia shall not be more than thirty per cent of the total expenses on research and development incurred by that person”;
(b) in subsection (4), by substituting for the proviso to that subsection the following proviso:
“Provided that the amount of deduction to be made shall be the amount of expenditure incurred—
(a) where the amount of expenses on research and development incurred for the basis period for a year of assessment outside Malaysia is more
than thirty per cent of the total expenses on research and development incurred by that person; or
(b) where subsection (4a) applies.”; and
(c) in subsection (4a), by inserting after the words “A pioneer company” the words “resident in Malaysia”.
Amendment of section 34b
Subsection 34b(1) of the principal Act is amended by inserting after the words “a person” the words “resident in Malaysia”.
Amendment of section 39
Paragraph 39(1)(r) of the principal Act is amended by substituting for the words “Labuan company” the words “Labuan entity referred to in paragraph 2b(1)(a) of the Labuan Business Activity Tax Act 1990”.
Amendment of section 44
Section 44 of the principal Act is amended—
(a) in subparagraph (5b)(a)(ii), by deleting the word “nominal”; and
(b) in paragraph (5c)(a), by deleting the word “nominal”.
Amendment of section 44a
Paragraph 44a(3)(c) of the principal Act is amended by inserting after the word “indirectly” the words “(through the medium of other companies resident and incorporated in Malaysia)”.
Amendment of section 45a
Subsection 45 a (1) of the principal Act is amended by substituting for the words “three thousand five hundred ringgit” the words “five thousand ringgit”.
Amendment of section 46
Section 46 of the principal Act is amended—
(a) in subsection (1)—
(i) in paragraph (c), by substituting for the words “five thousand ringgit” the words “eight thousand ringgit”;
(ii) by substituting for paragraph (f) the following paragraph:
“(f) fees expended in that basis year by that individual on himself for—
(i) any course of study up to tertiary level, other than a Masters or Doctorate degree, undertaken for the purpose of acquiring legal, accounting, Islamic financing, technical, vocational, industrial, scientific or technological qualification or skill, in any institution or professional body in Malaysia recognized by the Government or approved by the Minister;
(ii) any course of study for a Masters or Doctorate degree undertaken for the purpose of acquiring any qualification or skill, in any institution or professional body in Malaysia recognized by the Government or approved by the Minister; or
(iii) any course of study undertaken for the purpose of upskilling or self-enhancement and that course is conducted by a body recognized by the Director General of Skills Development under the National Skills Development Act 2006 [Act 652], for the years of assessment 2021 and 2022, limited to a maximum amount of one thousand ringgit for each year of assessment,
and the total deduction under this paragraph shall be subject to a maximum amount of seven thousand ringgit;”;
(iii) in paragraph (g)—
(A) in subparagraph (i), by deleting the word “or” at the end of that subparagraph;
(B) in subparagraph (ii), by substituting for the colon at the end of that subparagraph the words “; or”;
(C) by inserting after subparagraph (ii) the following subparagraph:
“(iii) on himself, his wife or child for vaccination, or in the case of a wife, on herself, her husband or child for vaccination an amount limited to a maximum of one thousand ringgit:”;
(D) i n p a r a g r a p h ( b ) o f t h e p r o v i s o , by substituting for the words “six thousand ringgit; and” the words “eight thousand ringgit;”;
(E) in subparagraph (c)(B) of the proviso, by inserting the word “and” at the end of that subparagraph; and
(F) by inserting after paragraph (c) of the proviso the following paragraph:
“(d) for the purposes of subparagraph (iii), the vaccinations which qualify for deduction are for:
(i) pneumococcal;
(ii) human papillomavirus
(HPV);
(iii) influenza;
(iv) rotavirus;
(v) varicella;
(vi) meningococcal;
(vii) TDAP combination (tetanus-diphtheriaacellular-pertussis); and
(viii) Coronavirus Disease 2019 (COVID-19);”;
(iv) in paragraph (h)—
(A) by substituting for the words “five hundred ringgit” the words “one thousand ringgit”; and
(B) in the proviso, by substituting for the words “six thousand ringgit” the words “eight thousand ringgit”;
(v) in subparagraph (p)(i)—
(A) by inserting after the word “purchase” the words “or subscription”; and
(B) by deleting the word “printed”;
(vi) in paragraph (c) of the proviso to paragraph (q), by deleting the word “and” at the end of that paragraph;
(vii) in the proviso to paragraph (r)—
(A) by deleting the word “and” at the end of paragraph (a);
(B) by substituting for the full stop at the end of paragraph (b) the words “; and”; and
(C) by inserting after paragraph (b) the following paragraph:
“(c) a further one thousand ringgit shall be allowed for the years of assessment 2020 and 2021;”; and
(viii) by inserting after paragraph (r) the following paragraphs:
“(s) an amount limited to a maximum of one thousand ringgit expended or deemed expended under subsection (3) in respect of the payment for accommodation at the premises registered with the Commissioner of Tourism under the Tourism Industry Act 1992 [Act 482] and entrance fee to a tourist attraction in that basis year by that individual as evidenced by receipts on the amount expended:
Provided that the payment is made on or after 1 March 2020 but not later than 31 December 2021;
(t) an amount limited to a maximum of two thousand and five hundred ringgit expended or deemed expended under subsection (3) in that basis year by that individual for the purchase of
a personal computer, smartphone or tablet (not being used for the purposes of his own business) for his own use or for the use of his wife or child, or in the case of a wife, for her own use or for the use of her husband or child as evidenced by receipts issued in respect of the purchase and the deduction under this paragraph shall be additional to any deduction under paragraph (p):
Provided that—
(a) the purchase is made on or after 1 June 2020 but not later than 31 December 2020; and
(b) the total amount of deduction under this paragraph shall exclude the amount deducted under paragraph (p); and
(u) an amount limited to a maximum of five hundred ringgit expended or deemed expended under subsection (3) in that basis year by that individual—
(i) for the purchase of sports equipment for any sports activity as defined under the Sports Development Act 1997 [Act 576] (excluding motorized two-wheel bicycles);
(ii) for the payment of rental or entrance fee to any sports facility; and
(iii) for the payment of registration fee for any sports competition where the organizer is approved and licensed by the Commissioner of Sports under the Sports Development Act 1997,
for his own use or under his name or for the use of or under the name of his wife or child, or in the case of a wife, for her own use or under her name or for the use of or under the name of her husband or child as evidenced by receipts issued in respect of the purchase or payment, as the case may be, and the deduction under this paragraph shall be additional to any deduction under paragraph (p):
Provided that the total amount of deduction under this paragraph shall exclude the amount deducted under paragraph (p).”; and
(b) in subsection (3), by substituting for the words “and (r)” the words “, (r), (s), (t) and (u)”.
Amendment of section 47
Paragraph 47(1)(b) of the principal Act is amended by substituting for the words “three thousand five hundred ringgit” the words “five thousand ringgit”.
New section 65b
The principal Act is amended by inserting after section 65a the following section:
“Incentive scheme
65b. (1) Where a person referred to in paragraph 6(1)(m) carries on a business in Malaysia in respect of a source consisting of a qualifying activity under an incentive scheme approved by the Minister, the business shall be treated as a separate and distinct business and source of that person.
(2) The chargeable income of a person in respect of the source consisting of the qualifying activity referred to in subsection (1), for a year of assessment shall be the statutory income from that source reduced by any amount of deduction falling to be made pursuant to subsection 43(2) relating to that source and so much of the amount which has not been deducted from that statutory income for the year of assessment the incentive scheme ends shall only be deductible in accordance with subsection 43(2) for a period of seven consecutive years of assessment.
(3) For the purposes of subsection (2), the period of seven consecutive years of assessment shall commence immediately following that year of assessment the incentive scheme ends and any amount of balance of the amount referred to in that subsection which is not deductible at the end of that period shall be disregarded for the purposes of this Act.
(4) The chargeable income of a person in respect of the source or sources other than the source consisting of the qualifying activity referred to in subsection (1) for a year of assessment shall be the statutory income from that source or the aggregate of the statutory income from each of those sources, as the case may be, reduced by any deduction falling to be made pursuant to subsections 43(2) and 44(1):
Provided that in so making the deductions under subsections 43(2) and 44(1), no regard shall be had to the adjusted loss, if any, from the source consisting of such qualifying activity.
(5) Where the person referred to in subsection (1) fails to comply with the conditions prescribed by the Minister under Part XVII of Schedule 1, the Director General may at any time within five years after the expiration of the year of assessment for which the rate prescribed by the Minister under Part XVII of Schedule 1 was applied, make such additional assessments upon that person as appears to the Director General to be necessary in order to counteract any benefit obtained under Part XVII of Schedule 1.
(6) The person who carries on a business in respect of the source consisting of a qualifying activity referred to in subsection (1) shall maintain a separate account for the income derived from such qualifying activity for the basis period for each year of assessment.”.
Amendment of section 77a
Subsection 77 a (1 a ) of the principal Act is amended by inserting after the words “a company” the words “and a limited liability partnership”.
Amendment of section 83
Section 83 of the principal Act is amended—
(a) in subsection (2), by substituting for the words “shall not later than one month thereafter give written notice to the Director General stating the full name and address of the individual and the terms and date of commencement of the employment” the words “shall give notice in the prescribed form to the Director General not later than thirty days after the commencement of the employment”;
(b) in subsection (3)—
(i) by inserting after the word “employment” the words “or where an individual under his employment dies”;
(ii) by substituting for the words “not less than one month before the cessation give written notice thereof to the Director General stating the full name and address of the individual and the expected date of cessation” the words “, not less than thirty days before the cessation of the employment, or in respect of cessation by reason of death not more than thirty days after being informed of the death of the individual, give notice in the prescribed form to the Director General of the cessation of the employment”;
(iii) in the first proviso to subsection (3), by substituting for the words “a notice given less than one month before the cessation or a notice given on or after the cessation” the words “a notice in the prescribed form given less than thirty days before the cessation of the employment, or a notice in the prescribed form given on or after the cessation, or in respect of cessation by reason of death a notice in the prescribed form given more than thirty days after being informed of the death of the individual”; and
(iv) in the second proviso to subsection (3), by substituting for the words “the written notice” the words “the notice in the prescribed form to the Director General”; and
(c) in subsection (4)—
(i) by substituting for the words “one month” wherever appearing the words “thirty days”;
(ii) by substituting for the words “written notice of the individual’s departure” the words “notice in the prescribed form”; and
(iii) in paragraph (a) of the proviso, by inserting after the words “a notice” wherever appearing the words “in the prescribed form”.
Amendment of section 103
Subsection 103(9) of the principal Act is amended by deleting the words “(1a),”.
New section 103b
The principal Act is amended by inserting after the deleted section 103a the following section:
“Tax payable notwithstanding institution of proceedings under any other written law
103b. The institution of any proceedings under any other written law against the Government or the Director General shall not relieve any person from liability for the payment of any tax, debt or other sum for which he is or may be liable to pay under this Part.”.
Amendment of section 104
Section 104 of the principal Act is amended—
(a) in paragraph (1)(b), by substituting for the words “103(1a), (3)” the words “103(3)”; and
(b) by inserting after subsection (1) the following subsection:
“(1a) The certificate referred to in subsection (1) may be issued to any Commissioner of Police or Director of Immigration through an electronic medium or by way of electronic transmission.”.
Amendment of section 106
Subsection 106(3) of the principal Act is amended by substituting for the words “103(1a), (3)” the words “103(3)”.
Amendment of section 109d
Section 109d of the principal Act is amended by deleting paragraph (4)(a) and subsection (5).
New section 113b
The principal Act is amended by inserting after section 113a the following section:
“Failure to furnish contemporaneous transfer pricing documentation
113 b . (1) Any person who makes default in furnishing contemporaneous transfer pricing documentation in respect of any year of assessment, in accordance with any rules made under paragraph 154(1)(ed) to implement and facilitate the operation of section 140a, shall be guilty of an offence and shall, on conviction, be liable to a fine not less than twenty thousand ringgit and not more than one hundred thousand ringgit or to imprisonment for a term not exceeding six months or to both.
(2) In any prosecution under subsection (1), the burden of proving that contemporaneous transfer pricing documentation has been furnished shall be upon the accused person.
(3) Where a person has been convicted of an offence under subsection (1), the court may make a further order that the person shall comply with the relevant provisions of the rules under which the offence has been committed within thirty days, or such other period as the court deems fit, from the date the order is made.
(4) Where in relation to any year of assessment a person makes default in furnishing contemporaneous transfer pricing documentation in accordance with any rules made under paragraph 154(1)(ed) to implement and facilitate the operation of section 140 a , and no prosecution under subsection (1) has been instituted in respect of the default in furnishing contemporaneous transfer pricing documentation, the Director General may by notice in writing or in the notice of assessment require that person to pay a penalty
of not less than twenty thousand ringgit and not more than one hundred thousand ringgit and, if that person pays that penalty, or where the penalty is abated or remitted under subsection 124(3), so much, if any, of the penalty as has not been abated or remitted, he shall not be liable to be charged on the same facts with an offence under subsection (1).
(5) The person served with a notice in writing referred to in subsection (4) may appeal to the Special Commissioners within thirty days as if the notice was a notice of assessment and the provisions of this Act relating to appeals shall apply accordingly with any necessary modifications.”.
Amendment of section 124
Section 124 of the principal Act is amended—
(a) in the shoulder note, by inserting after the word “remit” the words “surcharge or”; and
(b) in subsection (3), by inserting after the words “remit any” the words “surcharge or”.
Amendment of section 140a
Section 140a of the principal Act is amended—
(a) in the shoulder note, by substituting for the words “the price on certain transactions” the words “price, disregard structure and impose surcharge”;
(b) by inserting after subsection (3) the following subsections:
“(3 a ) The Director General may disregard any structure adopted by a person in entering into a transaction if—
(a) the economic substance of that transaction differs from its form; or
(b) the form and substance of that transaction are the same but the arrangement made in relation to the transaction, viewed in totality, differs from those which would have been adopted by independent persons behaving in a commercially rational manner and the actual structure impedes the Director General from determining an appropriate transfer price.
(3 b ) Where the Director General disregards any structure adopted by a person entering into a transaction under subsection (3a), the Director General shall make adjustments to the structure of that transaction as he thinks fit to reflect the structure that would have been adopted by an independent person dealing at arm’s length having regard to the economic and commercial reality.
(3c) Where this section and any rules made under paragraph 154(1)(ed) apply, the Director General may by notice in writing require that person to pay a surcharge of not more than five per cent of the amount of increase of any income generally, or reduction of any deduction or loss, as the case may be, as a consequence of exercising his powers to substitute the price in respect of a transaction entered into by a person to reflect an arm’s length price for that transaction or to disregard any structure adopted by a person in entering into a transaction.
(3 d ) Any surcharge required to be paid by a person under subsection (3c) shall be collected by the Director General as if it were tax payable by that person, but shall not be treated as tax so payable for the purposes of any provision of this Act other than sections 103 to 106.”; and
(c) in subsection (5), by substituting for the words “subsection (2)” for the words “subsections (2) and (3a)”.
Amendment of Schedule 1
Schedule 1 to the principal Act is amended—
(a) in Part I, in paragraph 1, in the column Rate of income tax, by substituting for the words “14 per cent” appearing in the fifth line the words “13 per cent”; and
(b) by inserting after Part XVI the following parts:
“Part XVII
1. Notwithstanding Part I, income tax shall be charged for a specified year of assessment on the chargeable income of a person who carries on business in respect of a qualifying activity under an incentive scheme approved by the Minister at the rate of not more than 20 per cent on every ringgit of that chargeable income.
2. In this Part, the applicable rate, the specified year of assessment and the conditions of the incentive scheme shall be as prescribed by the Minister.
Source: Laws of Malaysia, Attorney General's Chambers of Malaysia (lom.agc.gov.my). Not a copy of the Gazette printed by the Government Printer (Interpretation Acts 1948 and 1967, s 61).
