On 10 February 2020, Malaysia has gazetted the Labuan Business Activity Tax (Amendment) Act 2020 (“the Amendment Act”) which comes into operation on 11 February 2020. The following tax measures are included in the act.

• A company in Labuan that does business in Labuan that does not meet the substance requirements of the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2018 [P.U.(A) 392/2018] is to be charged at the rate of 24% upon its chargeable profits for a year of assessment.
• A new Section 3B is introduced to determine the residence status of a Labuan company specifically for the purpose of the Double Taxation Arrangement (DTA) implemented in accordance with Section 132 of the ITA.
•  A new Section 13A is inserted to provide that a tax payable arising from an assessment made under Section 6 of the LBATA is due and payable when the notice of assessment is served on a person. If the tax is not paid within thirty days after the service of the notice, the tax unpaid will be increased by 10% and that sum shall be recoverable as tax due and payable under the LBATA.
• A new section 13A is inserted to provide that tax resulting from an assessment under Section 6 of LBATA is due and payable when the assessment notice is served to a person. If the tax is not paid within 30 days of delivery of the notification, the unpaid tax will increase by 10% and that sum shall be recoverable as tax due and payable under the LBATA.
• A person affected by an assessment made by the DG may lodge an appeal with the Special Commissioners for Income Tax (SCIT) in the same way as a complaint against an assessment of income tax under the ITA and Sections 99, 100, 101 and 102 of the ITA, insofar as they are applicable with the necessary changes.
• The new Section 17D is a special provision introduced relating to a transaction between related parties and in particular, on the matter pertaining to transfer pricing. With the proposed amendment, the DG may substitute the price in a related party transaction for the acquisition or supply of property or services where one has control over the other person and the transaction was not at arm’s length.
• The new Section 17D is a special provision that is introduced in relation to a transaction between related parties and in particular in relation to transfer prices. With the proposed change, DG can replace the price of a related party transaction for the acquisition or supply of property or services if one has control over the other person and the transaction was not at arm’s length.
• Every person who is required to make a return for their earnings must keep records for seven years from the end of the year to determine their taxable earnings and the tax payable under the proposed new Section 22E.
• It is proposed that the Director General (DG) may raise assessment or additional assessment but must comply within 5 years after the end of the YA for non-transfer pricing cases and within 7 years after the end of the YA for transfer pricing cases.

The measures of the Act generally apply from the year of assessment 2020.