INCOME TAX ACT 1967 (ACT 53) PART VII - COLLECTION AND RECOVERY OF TAX
Section 108. Deduction of tax from dividends.
(1) Where a dividend is paid or credited by a company to any of its shareholders in the basis period for a year of assessment, then, if the dividend is deemed by virtue of section 14 to be derived from Malaysia, the company shall be entitled to deduct tax therefrom at the rate applicable to the company on the chargeable income for that year of assessment or, where there is no chargeable income of the company for that year at the rate which would be so applicable if there were such chargeable income.
(2) Where a company pays, credits or distributes without deduction of tax a dividend from which it is entitled to deduct tax (or a dividend from which it would have been entitled to deduct tax if the dividend had been wholly paid in cash) , the dividend shall be deemed to be a dividend of such a gross amount as determined in accordance with the formula-
1 X B
--–----
(1– A)
where
A is the rate of tax applicable to the company for a year of assessment at the time of the payment, crediting or distribution of the dividend; and
B is the amount in fact paid or credited or where the dividend consists of property other than money, the amount of the market value of that property at the time of the distribution of the dividend,
and a sum equal to the difference between that gross amount and the amount in B in the above formula shall be deemed to have been deducted from the dividend as tax.
(3) Notwithstanding any other provision of this Act, where a dividend is paid, credited or distributed with or without deduction of tax in the basis period for a year of assessment, and there is a revision in the rate of tax for companies for that year of assessment (in this subsection referred to as the revised rate) , the amount of the dividend received by the shareholder shall be deemed to be a dividend of such a gross amount as determined in accordance with the formula-
1 X B
--–- ----
(1– A)
where
A is the revised rate of tax applicable to the company for that year of assessment at the time of the payment, crediting or distribution of the dividend; and
B is the amount in fact paid or credited or where the dividend consists of property other than money, the amount of the market value of that property at the time of the distribution of the dividend,
and a sum equal to the difference between that gross amount and the amount in B in the above formula shall be deemed to have been deducted from the dividend as tax.
(4) Every company shall upon paying, crediting or distributing to a shareholder a dividend of the kind to which subsection (1) or (2) applies (whether tax is deducted therefrom or not) furnish the shareholder with a certificate setting forth in respect of the dividend-
(a) the gross amount;
(b) the amount of tax-
(i) which the company is entitled to deduct under subsection (1) ; or
(ii) which is deemed to have been deducted under subsection (2) ; and
(c) the amount in fact paid or credited or where the dividend consists of property other than money, the amount of the market value of that property at the time of the distribution of the dividend.
(5) Within six months following the close of the accounting period, every resident company shall render to the Director General a statement in the prescribed form showing for a year of assessment-
(a) the total amount of tax-
(i) which the company is entitled to deduct under subsection (1) ; and
(ii) which is deemed to have been deducted under subsection (2) or (3) ,
from that dividend paid, credited or distributed to its shareholders in the basis period for that year of assessment (that total amount being in this section referred to as the compared total) ; and
(b) the aggregate of the amount-
(i) of the tax paid (if any) and an amount of the tax set off under section 110 (if any) (restricted to the amount of the tax on the chargeable income of the company less any rebate under section 6B or any relief given for a year of assessment under section 132 or 133) less any tax refunded to the company in the basis period for that year of assessment; and
[Am.Act A1151:s.21]
(ii) the balance (if any) carried forward for the credit of the company in accordance with subsection (8),
(that aggregate amount being in this section referred to as the compared aggregate) .
(6) Where, in relation to a year of assessment and a company, the compared total exceeds the compared aggregate at the end of the basis period for a year of assessment, a sum equal to the amount of the excess shall be a debt due from the company to the Government and that debt shall be due and payable on the due date.
(7) Where any excess due and payable by a company under subsection (6) has not been paid by the due date, so much of the excess as is unpaid upon the expiration of that day shall, without any further notice being served, be increased by an amount equal to ten per cent of the excess so unpaid, and the amount unpaid and the increase on the amount unpaid shall be a debt due from the company to the Government and that debt shall be payable forthwith to the Director General.
(8) Where in relation to a company, the compared aggregate exceeds the compared total at the end of the basis period for a year of assessment, a sum equal to the amount of the excess shall be carried forward as a balance for the credit of the company to the following year of assessment.
(9) Where in relation to a year of assessment, a company fails-
(a) to render the statement referred to in subsection (5) ; or
(b) to provide the information required in the statement referred to in subsection (5) ,
and the Director General is of the opinion that the company has paid, credited or distributed dividends to its shareholders in the basis period for that year of assessment, he may compute the amount of the excess referred to in subsection (6) , if any, and shall serve on the company a written requisition in the prescribed form calling upon the company to pay an amount equal to that excess and an amount of an increase not exceeding the amount equal to that excess, and the amount equal to that excess and the increase on that amount shall be a debt due from the company to the Government and that debt shall be payable forthwith to the Director General upon the service of the requisition.
(10) Where a company-
(a) is not entitled to deduct tax under this section from a dividend paid or credited in a basis period for a year of assessment to any of its shareholders; and
(b) issues to any one of its shareholders a certificate which purports to show that an amount of tax has been deducted or is deemed to have been deducted under this section from a dividend paid, credited or distributed to that shareholder,
an amount equal to what would have been the total amount of tax deducted or deemed to have been deducted, if subsection (1) or (2) has been applicable, from the gross amount of the dividend (ascertained in accordance with subsection (2) ) paid, credited or distributed to all its shareholders at the time that the dividend was paid, credited or distributed to those shareholders shall be an amount due from the company to the Government and that amount shall be increased by an amount not exceeding the amount due; and the Director General shall serve on the company a written requisition in the prescribed form calling upon the company to pay the amount due and the increase on the amount due, and that amount shall be a debt due from the company to the Government and shall be payable forthwith to the Director General upon the service of the requisition:
Provided that, where the company satisfies the Director General that such certificates have been issued only to particular shareholders specified by the company, that debt shall be reduced to an amount ascertained by reference to the certificates issued to those particular shareholders.
(11) Where in relation to a year of assessment there has been a payment of tax under section 103A an instalment payment under section 107C or a refund of tax , the Director General may make-
[Am.Act A1151:s.21]
(a) all such revisions of the compared total, the compared aggregate or the balance mentioned in subsection
(8) (if any) ;
(b) all such repayments of the whole or any part of a debt paid pursuant to subsection (6) , (9) or (10) ; and
(c) all such requisitions under subsection (9) or (10) , as appear to him to be appropriate in the circumstances.
(12) The provisions of section 23(b) as to the day on which a dividend is to be treated as paid or distributed shall apply for the interpretation of this section and where this section has applied to a dividend which has been credited it shall not apply to that dividend when paid.
(13) Any debt due under this section shall be recoverable as if it were tax due and payable under this Act.
(14) In this section-
"due date" has the same meaning as in section 103A(12) ;
"tax paid" means any payment of tax made by the company in the basis period for a year of assessment, whether or not paid through instalments under section 107C, less payments (if any) in respect of-
(a) the tax payable for the year of assessment 2000 on current year basis and prior years of assessment;
(b) any penalties imposed under section 112(3) or 113(2) ;
(c) any increase in tax under section 103, 103A, 107B or 107C or
(d) any excess or any increase on the excess under section 108.
(14A) In this section,a reference to "tax refunded " or "a refund of tax "is a reference to —
(a) the amount of instalments that has been paid under section 107C for a year of assessment less the amount of tax payable (excluding any penalty imposed under section 112 or 113) for that year of assessment;or
(b) the amount of tax payable (excluding any penalty imposed under section 112 or 113) discharged by virtue of the assessment that has been reduced or discharged:
Provided that the amount of tax payable (excluding any penalty imposed under section 112 or 113) under that assessment has been paid.
[Ins. Act A1151:s.20]
(15) This section shall not apply to-
(a) a co-operative society;
(b) an offshore company in respect of a dividend paid, credited or distributed out of-
(i) income derived from an offshore business activity; or
(ii) income exempt from tax;
(c) a life insurer in respect of his chargeable income which is subject to tax under Part VIII of Schedule 1; or
(d) a company limited by guarantee.
[Subs. Act A1093: s.15]
Special provision relating to section 108.
Notwithstanding the provisions of subsection 108(4) of the principal Act before the coming into operation of the amendment to section 108 in section 15 of this Act, in relation to the year of assessment 2000 on current year basis, the statement referred to in that subsection shall be rendered by the company to the Director General within three months after the end of that year of assessment.
[Ins. Act A1093: s.16]
______________________________________________________ [Shall have effect for the year of assessement 2004 and subsequent years of assessment.]
(11) Where in relation to a year of assessment there has been a payment of tax under section 103 or an instalment payment under section 107C or a refund of tax , the Director General may make-
[Am. Act A1151:s.21]
(14) In this section-
"due date" has the same meaning as in section 103(12)(a) ;
"tax paid" means any payment of tax made by the company in the basis period for a year of assessment, whether or not paid through instalments under section 107C, less payments (if any) in respect of-
(a) -
(b) -
(c) any increase in tax under section 103 , 107B or 107C or
