Finance 1

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LAWS OF MALAYSIA
REPRINT

Act 241

FINANCE ACT 1981

Incorporating all amendments up to 1 January 2006

PUBLISHED BY
THE COMMISSIONER OF LAW REVISION, MALAYSIA
UNDER THE AUTHORITY OF THE REVISION OF LAWS ACT 1968
IN COLLABORATION WITH
PERCETAKAN NASIONAL MALAYSIA BHD
2006

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FINANCE ACT 1981

Date of Royal Assent ... ... ... … … 12 January 1981

Date of publication in the Gazette … ... 15 January 1981

PREVIOUS REPRINT

First Reprint ... ... ... ... ... 2001

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LAWS OF MALAYSIA

Act 241

FINANCE ACT 1981

ARRANGEMENT OF SECTIONS

CHAPTER I

PRELIMINARY

Section

1. Short title and commencement

2. Amendment of Acts and Ordinance

CHAPTER II

AMENDMENTS TO THE INCOME TAX ACT 1967

3. Commencement of amendments to Income Tax Act 1967

4. Amendment of section 5
5. New section 6 B
6. Amendment of section 7
7. New section 13A
8. Amendment of section 18
9. Amendment of section 22
10. Amendment of section 39
11. Amendment of section 47
12. Amendment of section 49
13. Amendment of section 108
14. Amendment of section 109
15. Amendment of section 128
16. Amendment of Schedule 1
17. Amendment of Schedule 3
18. Amendment of Schedule 6 Adam Haida & Co
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CHAPTER III

AMENDMENT TO THE SUPPLEMENTARY

INCOME TAX ACT 1967

Section

19. Commencement of amendment to Supplementary Income Tax Act 1967

20. Amendment of section 16

CHAPTER IV

AMENDMENTS TO THE REAL PROPERTY

GAINS TAX ACT 1976

21. Commencement of amendments to Real Property Gains Tax Act 1976

22. Amendment of section 2
23. Amendment of section 8
24. Amendment of section 47
25. Amendment of Schedule 1
26. Amendment of Schedule 2
27. Amendment of Schedule 4
28. Amendment of Schedule 5

CHAPTER V

AMENDMENTS TO THE STAMP ORDINANCE 1949

29. Commencement of amendments to Stamp Ordinance 1949

30. New section 5 A
31. Amendment of First Schedule

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 Finance 5
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LAWS OF MALAYSIA

Act 241

FINANCE ACT 1981

An Act to amend the Income Tax Act 1967, the Supplementary

Income Tax Act 1967, the Real Property Gains Tax Act 1976 and
the Stamp Ordinance 1949, and to provide for matters connected
therewith.

[ ]

BE IT ENACTED by the Seri Paduka Baginda Yang di-Pertuan

Agong with the advice and consent of the Dewan Negara and
Dewan Rakyat in Parliament assembled, and by the authority of
the same, as follows:

C HAPTER I

PRELIMINARY

Short title and commencement

1. This Act may be cited as the Finance Act 1981 and shall have
effect or be deemed to have effect as provided in this Act.

Amendment of Acts and Ordinance

2. The Income Tax Act 1967 [Act 53], the *Supplementary Income
Tax Act 1967 [Act 54], the Real Property Gains Tax Act 1976
[Act 169] and the **Stamp Ordinance 1949 [Ord. 59 of 1949] are
amended respectively in the manner specified in Chapters II, III,
IV and V of this Act.

*NOTE—Supplementary Income Tax Act 1967 [Act 54] has since been repealed by Finance Act
[Act 497]—see subsection 16(1) of Act 497.
**NOTE—Stamp Ordinance 1949 [Ord. 59 of 1949] has since been revised as Stamp Act 1949
[Act 378]. Adam Haida & Co
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CHAPTER II

AMENDMENTS TO THE INCOME TAX ACT 1967

Commencement of amendments to Income Tax Act 1967

3. (1) The provisions of this Chapter [except section 8,

paragraph 10(b), sections 11, 12, 16 and paragraph 18(a)] shall
have effect for the year of assessment 1981 and subsequent years
of assessment.

(2) Section 8, paragraph 10(b), sections 11, 12, 16 and paragraph

18(a) shall be deemed to have effect for the year of assessment
1980 and subsequent years of assessment.

Amendment of section 5

4. Section 5 of the Income Tax Act 1967, which in this Chapter

is referred to as the principal Act, is amended by inserting after
subsection (3) the following subsection (4)—

“(4) In ascertaining the chargeable income of a company for

the purpose of section 3A there shall not be taken into account
dividend income derived from Malaysia.”.

New section 6B

5. The principal Act is amended by inserting after section 6A the

following section 6B—

“Tax rebate on loan to a small business

6 B. (1) Subject to this section, income tax charged for each

year of assessment upon the chargeable income of a person
who gives any loan to a small business shall be rebated by
an amount equivalent to two per cent pro rated per annum,
or such other rate as may be prescribed from time to time by
the Minister, on the outstanding balance of the loan
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on term loan basis before any set off is made under
section 110 and any credit is allowed under section 132 or
section 133:

Provided that where the rebate exceeds the income tax

charged (before any such rebate) for any year of assessment,
the excess shall not be paid to that person and shall not be
available as a credit to set off any tax liability for that year
of assessment but it shall be available as a credit to set off
any income tax chargeable for any subsequent year of
assessment.

(2) ‘Loan to a small business’ means a loan that conforms

to the guidelines laid down by an appropriate authority designated
by the Minister from time to time.”.

Amendment of section 7

6. The principal Act is amended by substituting for paragraph

7(1)(b) the following:

“(b) he is in Malaysia in that basis year for a period of less than

one hundred and eighty-two days and that period forms part
of a period of more than one hundred and eighty-two
consecutive days (hereinafter referred to in this paragraph
as such period) throughout which he is in Malaysia in the
basis year for the year of assessment immediately preceding
that particular year of assessment or in that basis year for
the year of assessment immediately following that particular
year of assessment:

Provided that any temporary absence from Malaysia—

(i) connected with his service in Malaysia and owing
to service matters or attending conferences or
seminars or study abroad;
(ii) owing to ill-health involving himself or a member
of his immediate family; and
(iii) in respect of social visits not exceeding fourteen
days in the aggregate,

shall be taken to form part of such period;”.

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New section 13A

7. The principal Act is amended by inserting after section 13 the

following section 13A—

“Special provisions as to employment income while aboard

ship

13A. (1) Notwithstanding paragraph 13(2)(e) income from a

period of employment exercised aboard a ship while it is
engaged in international traffic shall not be deemed to be
derived from Malaysia if the ship is a Malaysian-registered
ship and is used in a business operated by a person resident
in Malaysia for the basis year for a year of assessment.

(2) For the purposes of this section, in any calendar year

the period of leave and return visits to Malaysia not exceeding
sixty days in the aggregate calculated by reference to the
number of days served aboard the ship upon the total number
of days in a calendar year shall be deemed to be employment
exercised aboard the ship.

(3) For the purposes of this section, ‘international traffic’

means any voyage excluding a voyage solely between ports
in Malaysia or a voyage commencing from any port in Malaysia
to any port in Singapore or vice versa.”.

Amendment of section 18

8. The principal Act is amended by deleting the words “except

timber (whether felled or otherwise)” in the interpretation of “crops”
in section 18.

Amendment of section 22

9. Section 22 of the principal Act is amended—

(a) by inserting the words “or deemed to have been received”
after the words “any sums receivable” in subsection (2);
(b) by deleting the word “and” in subparagraph (2)(a)(ii);
(c) by substituting for the full stop in paragraph (2)(b) a
Adam
semicolon and the word “and”; andHaida & Co
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(d) by inserting after paragraph (2)(b) the following:

“(c) a rebate under section 6B.”.

Amendment of section 39

10. Section 39 of the principal Act is amended—

(a) by inserting the words “or royalty” after the word “interest”
in paragraph (1)(f); and
(b) by deleting the symbol “)” after the words “State
Government” and inserting the symbol “)” after the words
“a statutory authority” and before the words “for the use
of” in paragraph (1)(g).

Amendment of section 47

11. Section 47 of the principal Act is amended—

(a) by substituting respectively for the symbols and figures“(4)”
and “(5)” in subsection (1) the symbols and figures“(3)”
and “(4)”;
(b) by substituting for the symbols and figure “(4)” in
subsection (2) the symbols and figure “(3)”; and
(c) by substituting for the symbols and figure “(3)” after the
word “and” in subsection (3) the symbols and figure
“(2)”.

Amendment of section 49

12. The principal Act is amended by inserting the words “five

hundred” after the words “three thousand” in the proviso to subsection
49(1).

Amendment of section 108

13. The principal Act is amended by inserting the words “any

rebate under section 6B or” after the word “less” in subsection
108(4). Adam Haida & Co
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Amendment of section 109

14. The principal Act is amended by substituting for subsection

109(1) the following:

“Deduction of tax from interest or royalty in certain cases

109. (1) Where any person (in this section referred to as the
payer) is liable to pay interest or royalty derived from Malaysia
to any other person not known to him to be resident or to
have a place of business in Malaysia, he shall upon paying
or crediting the interest (other than interest on an approved
loan or long-term loan or interest of the kind referred to in
paragraph 33 of Part I, Schedule 6) or royalty deduct therefrom
tax at the rate applicable to such interest or royalty, and
(whether or not that tax is so deducted) shall within one
month after paying or crediting the interest or royalty render
an account and pay the amount of that tax to the Director
General:

Provided that the Director General may—

(a) give notice in writing to the payer requiring him to
deduct and pay tax at some other rates or to pay or
credit the interest or royalty without deduction of tax;
or
(b) under special circumstances allow extension of time
for tax deducted to be paid over.”.

Amendment of section 128

15. The principal Act is amended by substituting for subsection

128(1) the following:

“Exemption from tax: residential premises and premises

where, owing to circumstances, owner is compelled to
vacate

128. (1) Subject to this section—

(a) where an individual who is the owner of a residence
occupies the residence (hereinafter referred to in
this section as that residence) as owner throughout
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and that year being referred to in this section as the
relevant period and the relevant year respectively)
or during any part of the relevant period, his gross
income from the occupation for the relevant period
or for that part of the relevant period, as the case
maybe, shall be disregarded for the purposes of this
Act; or
(b) where an individual is an employee, on satisfying
the Director General that as a result of being transferred
by his employer to another part of Malaysia or as
a result of taking up a new employment in another
part of Malaysia he is compelled to vacate that
residence in order to occupy another residence (not
owned by him) located at a place beyond a distance
of twenty miles from that residence, the rent receivable
by him from that residence shall be disregarded for
the purposes of this Act; or
(c) where an individual is not an employee, on satisfying
the Director General that he is compelled to vacate
that residence in order to occupy another residence
(not owned by him) located at a place beyond a
distance of twenty miles from that residence
immediately following a change in his business
operations from one part of Malaysia to another part
of Malaysia, the rent receivable by him from that
residence shall be disregarded for the purposes of
this Act.”.

Amendment of Schedule 1

16. The principal Act is amended by deleting the letter “s” in the
word “provides” in paragraph 1 of Part I of Schedule 1.

Amendment of Schedule 3

17. Schedule 3 to the principal Act is amended—

(a) by inserting after paragraph 11 the following paragraph
11A—
“11A. Subject to this Schedule, where in the basis
period for a year of assessment a person has for the
purposes of a business of his which consists of the
construction of any works,
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incurred qualifying plant expenditure on the provision
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of machinery or plant used directly in the construction
of such works, roads, structures and buildings, there
shall be made to him in relation to the source consisting
of that business for that year an allowance instead of
the allowance under paragraph 10 equal to three-tenths
of the expenditure, unless he elects in writing, when
claiming an allowance for that year in respect of that
expenditure, that the allowance be equal to one-fifth
of that expenditure.”;

(b) by inserting the words “or 11A” after the figures “11”
wherever they appear in paragraph 13(b);
(c) by deleting the words “of the residual expenditure at the
end of that period” and inserting the words “of that
expenditure” after the words “may be prescribed” in
paragraph 15;
(d) by inserting after paragraph 15 the following paragraph
15A—

“15A. Subject to this Schedule, where a person has

for the purposes of a business of his incurred qualifying
plant expenditure in relation to an asset more than six
years prior to the beginning of the basis period for the
year of assessment 1981 and an annual allowance was
made to him in relation to that source consisting of
that business for a year of assessment prior to the year
of assessment 1981 in respect of that expenditure, he
may elect in writing that an annual allowance be made
to him equal to one-half of the residual expenditure,
if any, for the year of assessment 1981 and the following
year of assessment provided that he was the owner of
the asset and it was in use for the purposes of his
business at the end of the basis period for each of those
years of assessment.”;

(e) by inserting the figures “15,” after the words “under

paragraph” in paragraph 18;
(f) by substituting for the words “residual expenditure” in
paragraph 19 the words “qualifying plant expenditure”;
and
(g) by substituting for the word “value” after the words
“exceeds the residual” in paragraph 35 the word
“expenditure”. Adam Haida & Co
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Amendment of Schedule 6

18. Part I of Schedule 6 to the principal Act is amended—

(a) by inserting after paragraph 25 the following paragraph
25B—

“25B. Sums received by way of gratuity paid out of

public funds on termination of a contract of employment
(less the employer’s contribution to the Employees
Provident Fund, if any, and interest thereon).”; and

(b) by inserting after paragraph 33 the following paragraph

34—

“34. Income under section 13A remitted to Malaysia.”.

CHAPTER III

AMENDMENT TO THE SUPPLEMENTARY INCOME

TAX ACT 1967

Commencement of amendment to Supplementary Income Tax

Act 1967

19. The provisions of this Chapter shall have effect for the year
of assessment 1981 and subsequent years of assessment.

Amendment of section 16

20. The Supplementary Income Tax Act 1967 is amended by

substituting for section 16 the following:

“Amount of development tax chargeable

16. Subject to this Part, the amount of development tax

chargeable for a year of assessment shall be—
(a) in the case of a person other than an individual, an
amount calculated at the rate of five per cent on every
ringgit of the development income of that person for
that year; and Adam Haida & Co
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(b) in the case of an individual, an amount calculated at
the rate of five per cent on every ringgit of his
development income for that year in excess of five
thousand ringgit:

Provided that where his development income for

that year does not exceed five thousand ringgit, he
shall be exempt from development tax for that year.”.

CHAPTER IV

AMENDMENTS TO THE REAL PROPERTY GAINS

TAX ACT 1976

Commencement of amendments to Real Property Gains Tax

Act 1976

21. (1) The provisions of this Chapter (except sections 24, 25 and
26) shall be deemed to have come into force on 18 October 1980.

(2) Sections 24, 25 and 26 shall be deemed to have come into

force on 7 November 1975.

Amendment of section 2

22. The Real Property Gains Tax Act 1976, which in this Chapter
is referred to as the principal Act, is amended by inserting
appropriately in subsection 2(1) the following interpretations of
“co-proprietor”, “co-proprietorship” and “permanent resident”—

‘ “co-proprietor” and “co-proprietorship” have the meaning

respectively assigned to them by the National Land Code [Act 56
of 1965];’;

‘ “permanent resident” means a person treated as such under any

written law relating to immigration;’.

Amendment of section 8

23. The principal Act is amended by inserting the words “who

is a citizen or an individual who is not a citizen but is a permanent
resident” after the words “to an individual” in section
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Amendment of section 47

24. The interpretation of “classified person” in subsection 47(5)

of the principal Act is amended—
(a) by deleting the word “or” in paragraph (b);
(b) by inserting the word “or” after the semi-colon at the end
of paragraph (c); and
(c) by inserting after paragraph (c) the following paragraph
(d)—

“(d) the Director General of Valuation and public officers

under his direction and control;”.

Amendment of Schedule 1

25. Schedule 1 to the principal Act is amended—

(a) by substituting for the words “Body of persons and
partnership” in the marginal note to paragraph 1 the words
“Body of persons, partnership and co-proprietorship”;
and
(b) by inserting after subparagraph (2) of paragraph 1 the
following subparagraph (3)—

“(3) In the case of a co-proprietorship a disposal by

one of the co-proprietors of his share of the chargeable
asset shall be deemed to be part disposal of an asset
by him alone and he shall be assessable and chargeable
to tax on the chargeable gain resulting from such
disposal.”.

Amendment of Schedule 2

26. Schedule 2 to the principal Act is amended by inserting after

subparagraph 24(2) the following subparagraph (3)—

“(3) For the purposes of this paragraph the term“ instalments”

refers to two or more payments of the acquisition price (other
than any deposit or advance payment as stipulated in the agreement)
as agreed to by the parties.”.Adam Haida & Co
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Amendment of Schedule 4

27. Schedule 4 to the principal Act is amended by inserting the

words “to an individual who is a citizen or an individual who is
not a citizen but is a permanent resident” after the words “gain
accruing” in paragraph 2.

Amendment of Schedule 5

28. Schedule 5 to the principal Act is amended—

(a) by inserting between the words “RATES OF TAX” and

“Category of disposal” the following:

“ PART I

Except where Part II of this Schedule is applicable, the

following rates of tax shall apply:”; and

(b) by inserting at the end of the Schedule the following:

“ PART II

An individual who is not a citizen and not a permanent

resident shall be charged at the rate of 40 per cent on
every ringgit of the chargeable gain on the disposal of
a chargeable asset acquired by him after 17 October
1980.”.

CHAPTER V

AMENDMENTS TO THE STAMP ORDINANCE 1949

Commencement of amendments to Stamp Ordinance 1949

29. The provisions of this Chapter shall be deemed to have come

into force on 1 January 1981. Adam Haida & Co
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New section 5A
30. The Stamp Ordinance 1949, which in this Act is referred to
as the Ordinance, is amended by inserting after section 5 the
following section 5A—
“Loan for the purposes of small business
5A. Every instrument being the only or principal or primary
security for the payment or repayment of a loan to a small
business shall be indorsed by an authority approved by the
Minister of Finance that the loan was made for the purposes
of a small business.”.

Amendment of First Schedule

31. The First Schedule to the Ordinance is amended—
(a) by re-numbering sub-item 27(a) as sub sub-item 27(a)(i);
(b) by inserting after sub sub-item 27(a)(i) the following sub
sub-item 27(a)(ii):

“(ii) Being instruments under section 5A—

Not exceeding RM250,000 of RM1.00 for every
the aggregate loans in a RM1,000 or
calendar year fractional part
thereof.
For each additional RM1,000 RM5.00”; and
or part thereof

(c) by substituting for sub sub-item 49(1)(a) the following:

“(a) Without fine or When the Lease is for a period
premium when Not Exceeding Exceeding
the average rent exceeding one but not three years
calculated for a one year exceeding or for any
whole year— three years indefinite
period

(i) Does not NIL NIL NIL

exceed
RM2,400
(ii) For every RM1.00 RM2.00 RM4.00
RM250 or
part thereof
in excess of
RM2,400 ”
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LAWS OF MALAYSIA

Act 241

FINANCE ACT 1981

LIST OF AMENDMENTS

Amending law Short title In force from

– NIL –

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LAWS OF MALAYSIA

Act 241

FINANCE ACT 1981

LIST OF SECTIONS AMENDED

Section Amending authority In force from

– NIL –

DICETAK OLEH
PERCETAKAN NASIONAL MALAYSIA BERHAD,

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