WHAT IS STAMP DUTY? Stamp duty is a tax that is levied on documents. Historically, this included the

majority of legal documents such as cheques, receipts, military commissions,

marriage licences and land transactions. A physical stamp (a revenue stamp) had to

be attached to or impressed upon the document to denote that stamp duty had

been paid before the document was legally effective. More modern versions of the

tax no longer require an actual stamp.

STAMP DUTY IN MALAYSIA

The Assessment and collection of Stamp Duties is sanctioned by statutory law now

described as the Stamp Act 1949.

Types of Duty

The Stamp Act 1949 provides for:-

The imposition of Ad Valorem Duties (that is, according to the value) on:

(i) Instruments of transfer (implementing a sale or gift) of property including

marketable securities (meaning loan stocks and shares of public companies listed

on the Kuala Lumpur Stock Exchange), shares of other companies and of non

tangible property, for example, book debts, benefits to legal rights and goodwill;

(ii) Instruments creating interests in property, for example Tenancies and Statutory

Leases;

(iii) Instrument of security for monies including instruments creating contracts for

payment of monies or obligation for payment of monies (generally described as

"Bond");

(iv) Certain capital market instrument, for example, Contract Notes an.

The Imposition of Fixed Duties on

(i) A number of other legal, commercial, mercantile or capital market instruments,

for example, Power or Letter of Attorney, Articles of Association of a Company,

Promissory Notes, Policy of Insurance etc; and

(ii) A duplicate or a subsidiary or a collateral instrument when it can be shown that

the original or principal or primary instrument has been duly stamped.

Determination Of Liability

(i) The first step is to identify the class of instrument under which a particular

chargeable instrument may fall into. In the case of standard instruments, the rule in

classification of instruments is that the real and true meaning of the instrument is to

be ascertained, that the description of it given in the instrument itself by the parties

is immaterial. Whereas in the case of non-standard instruments, the substance of

the instrument, as construed by examination of the rights and obligations created

and not its FORM will determine its classification. Examples where this RULE would

apply include instruments effecting divestment of rights or interests in property by

way of a " Declaration of Trust" or a "Deed of Family Arrangement" or release on

"Sale" or by way of "Gift" or by way of "Security".

(ii) The second step involves statement of liability of standard instruments where an

instrument is liable to stamp duty within two different categories or heads. It is

provided that distinct matters including separate considerations shall be separately

charged.

(iii) The third step involves non-standard instrument which by its classification will

be liable to ad valorem duty. This instrument would require examination and when

appropriate, measurement of the value of the consideration, that is, the price of the

promise or act to be performed by the instrument.

The major principle in the application of the law on stamp duties is that

the subject matter of tax is the INSTRUMENT and not the TRANSACTION.

Examples Of Instruments Liable To Stamp Duty

Purchase Of Property

Tenant And Landlord

Person Receiving Financing

Purchase Of Property

Business Undertaking

In the case of purchase of any BUSINESS UNDERTAKING, the contract of sale and

purchase is chargeable to ad valorem duty on the price relating to goodwill, debt

and other chose-in action. The rate of duty is the same as that of IMMOVABLE

PROPERTY.

Immovable Property

The prescribed rate of duty is as shown below. The duty at this rate is also payable

where the instrument of transfer constitutes a DEED OF ASSIGNMENT executed on

sale or gift of the contractual interest on the property.

-On the first RM100,000:

RM1.00 for every RM100 or fractional part of RM100.

-On any amount in excess of RM100,000 but not exceeding RM500,000:

RM2.00 for every RM100 or fractional part of RM100.

-On any amount in excess of RM500,000

RM3.00 for every RM100 or fractional part of RM100.

Stock, Shares or Marketable Securities

The prescribed rate of duty is RM3.00 for every RM1,000 or fractional part of

RM1,000 on the price or value thereof on the date of transfer, whichever is the

greater.

Tenant And Landlord

-The lease or tenancy instrument which secures annual rent not exceeding RM2,400

is EXEMPTED from duty and presentation of these instruments at a stamping office

or centre is not necessary.

-The prescribed rate of duty on the instrument which secures annual rent exceeding

RM2,400 is as follows:

(For every RM 250 or part thereof in excess of RM2, 400)

When the lease is for a period Duty Rate

Not exceeding one year RM1.00

Exceeding one but not exceeding three years RM2.00

Exceeding three years or for any indefinite period RM4.00

(For every RM250 or part thereof in excess of RM2,400

-If the consideration for tenancy constitutes or includes a PREMIUM, additional duty

is chargeable and it is calculated on the amount of the premium at the rate

chargeable on immovable property.

-If the lease provides for differential rent, please contact The Deputy Collector of

Stamp Duty for further information.

Person Receiving Financing

Where the undertaking for discharge of a debt is:

-by way of PROMISSORY NOTE, the duty on the note is RM10.00 irrespective of

whether it is executed in favour of a commercial bank, merchant bank or borrowing

company or otherwise. The stamping must be completed BEFORE the instrument is

executed.

-secured by way of mortgage, charge, debenture and others, the duty on the

principal security is calculated at the rate of RM 5.00 for every RM 1000.00 or part

thereof.

Time Of Stamping Instruments

Instruments executed in Malaysia

In general all instruments executed in Malaysia should be stamped on or before the

time of execution.

Instruments executed out of Malaysia

Instruments other than cheques or promissory notes must be stamped within 30

days after it has first been received in Malaysia.

Cheques or notes drawn out of Malaysia

Cheques or promissory notes drawn or made out and brought into Malaysia before it

is stamped must affix the proper adhesive stamp before presenting the same for

acceptance or payment or endorses transfers or otherwise negotiates the same in

Malaysia.

Stamping of documents after executions

In general, any unstamped or insufficiently stamped instrument excluding cheque

or promissory note drawn or made within Malaysia may be stamped after execution

on payment of the unpaid duty, if the instrument is presented for stamping;

-Within 30 days of its execution if executed within Malaysia or;

-Within 30 days after it has been first received in Malaysia if it has been executed

out of Malaysia

Adjudication of Instruments

Purpose of adjudication

An application to determine the amount of duty chargeable on any executed

instrument can be made to the Collector. For this purpose the Collector may require

that the instruments be furnished together with an affidavit or other evidence. The

Collector may refuse such application until the required instrument and evidence

have been furnished accordingly.

The purpose of adjudication is to protect the parties to the contract in respect of the

admissibility of the instrument as evidence in court during a civil proceeding. An

instrument which is not duly stamped is not admissible in court as evidence.

Adjudication Of Instruments

The fee payable for adjudication of an instrument is RM10 ( with effect from 1st

January 1996 )

Responsibility Of Company Secretary / Registrar

Section 52(1) of The Stamp Act 1949 PROHIBITS registration, acceptance or

authentication of any instrument which has not been duly stamped.

If your duties include registration, acceptance or authentication of any instrument

including share transfer and DEED OF ASSIGNMENT, contact the Deputy Collector of

Stamp Duty if in doubt as to whether fixed duty or ad valorem duty is payable on

the instrument .

Failure to comply with the provisions of this section is punishable under Section

69(2) with a fine not exceeding RM1,500.

Responsibility Of Solicitors

If in doubt of any technical matters or procedures, please contact The Deputy

Collector of Stamp Duty for clarification. The clerk or office boy SHOULD NOT BE

INSTRUCTED to represent your firm in technical matters and procedures regarding

stamping.

Penalty

An instrument may be stamped within 30 days of its execution if executed within

Malaysia or within 30 days after it has been first received in Malaysia if it has been

executed outside Malaysia.

If it is not stamped within the period stipulated, a penalty of

(a) RM25.00 or 5% of the deficient duty, whichever is the greater, if stamped within

3 months after the time for stamping;

(b) RM50.00 or 10% of the deficient duty, whichever is the greater, if stamped after

3 months but not later than 6 months after the time for stamping;

(c) RM100.00 or 20% of the deficient duty, whichever is the greater, if stamped

after 6 months from the time for stamping;

may be imposed

(the above rates are effective from 1/1/2003)

Method of Payment

Payment may be made in the following manner:-

(i) Cash (if the duty does not exceed RM100) or

(ii) Revenue Stamp (if the duty does not exceed RM500) or

(iii) Money Order, Solicitor's Cheque or Bank Draft,made payable to the Deputy

Collector of Stamp Duty and sent together with the relevant instrument to the

stamp duty office by hand or through registered post.

Relief From Stamp Duty

Relief may be given pursuant to:

(i) Section 15 Stamp Act 1949

(ii) Section 15A Stamp Act 1949

RECENT AMENDMENTS TO THE STAMP ACT 1949

(With effect from 1 January 2001)

(i) All fixed duty documents (other than cheques, Articles of Association of a

company, Memorandum of Association of a company) are subject to duty of

RM10.00.

(ii) All documents constituting a Charge or Mortgage, Agreement for a Charge or

Mortgage (including that under the Syariah), Bond, Covenant, Debenture etc. being

the principal security for the payment or repayment of money are subject to duty of

RM5.00 for every RM1,000.00 or part thereof.

(iii) All documents being the security for payment or repayment of money made for

the purpose of pursuing higher education in higher educational institutions are

subject to duty of RM10.00.

LAW OF STAMP DUTY IN MALAYSIA

A purchaser of a property, besides paying legal fees to his solicitors, will have

to pay to the Collector of Stamp Duties stamp duty on the Sale and Purchase

Agreement; the Memorandum of Transfer; and if he is taking a loan to finance the

purchase of the property and charged the property as security, he will have to pay

stamp duty on the facility or Loan Agreement and the Memorandum of Charge.

(a) How to calculate the stamp duty payable

The stamp duty chargeable on the Sale and Purchase Agreement is RM10 each.

With regard to the Memorandum of Transfer, the rates of the duty are as follows:-

For every RM100 or fractional part of RM100 of the contract price or the market

value of the property, whichever shall be greater –

(i) RM1 on the first RM100,000.00;

(ii) RM2 on any amount in excess of theRM100,000 but not exceeding RM500,000;

and

(iii) RM3 on any amount in excess of RM500,000.

For example, the stamp duty on a Memorandum of Transfer for a property worth

RM500,000 is calculated as follows:-

FIRST RM100,000RM1 x RM100,000 ÷ RM100

= RM1,000

BALANCE RM400,000RM2 x RM400,000 ÷ RM100

= RM8,000

TOTAL STAMP DUTY PAYABLE: RM9,000

In case of the purchaser is taking a loan and charged the property as a security, it is

common practice now to treat the Loan or Facility Agreement as principal

instrument and the charge as subsidiary instrument. In the aforesaid circumstances,

the principal instrument will be charged with ad valorem duty whereas the

subsidiary instrument will be charged only RM10.

The ad valorem duty for the principal instrument of a loan is calculated at RM5 for

each RM1,000 or part thereof. For example, if the loan is RM400,000, the stamp

duty payable is calculated as follows:-

RM5 x RM400,000 ÷ RM1,000 = RM2,000

(b) When a document is to be stamped

Sale and Purchase Agreement, Loan or Facility Agreement and Charge executed in

Malaysia are to be stamped within 30 days of their execution. If the Sale and

Purchase Agreement, Loan or Facility Agreement and Charge are executed outside

Malaysia, the time for stamping the same is 30 days after they have been first

received in Malaysia.

As for the Memorandum of Transfer, it has to be sent to the Stamp Office for

adjudication to determine whether the stamp duty is chargeable based on the

contract price or the market value of the property. The Memorandum of Transfer

shall be stamped within 30 days from the date of the notice of assessment.

(c) Objection to the value assessed

In the event the market value assessed by the Collector of Stamp Duties is greater

than the contract price, the stamp duty chargeable will be based on the market

value instead of the contract price.

If the purchaser is dissatisfied with the assessment, he may object to the

assessment by giving written notice to the Collector of Stamp Duties within 30 days

from the date of assessment. The purchaser shall provide particulars and

information to support his objection. The Collector of Stamp Duties may on review,

cancel the original assessment if it appears to him that the original assessment is

excessive and substitute with a fresh assessment or maintain the same assessment

if it appears to him that the original assessment is not excessive.

However, the purchaser, in making objection to the original assessment, is not

relieved from paying the duty based on the original assessment within 30 days from

the date of the original notice of assessment.

Therefore, it would be advisable that the purchaser pays the duty under protest and

at the same time pursue with the objection.

If he succeeds in the objection, he may recover the excess stamp duty paid from

the Collector of Stamp Duties. If the purchaser is not satisfied with the review by the

Collector of Stamp Duties, he may appeal to the High Court within 21 days after the

purchaser is notified in writing the result of the review.

(d) Penalty on document not stamped within time

If a document is not stamped within the timeframe, the purchaser will have to pay,

in addition to the stamp duty payable, a penalty and the rates of the penalty are as

follows:-

(i) RM25 or 5% of the duty, whichever shall be greater, if the same is stamped

within three months after the time of stamping;

(ii) RM50 or 10% of the duty, whichever shall be greater, if the same is stamped

later than three months but not later than six months after the time of stamping;

(iii) RM100 or 20% of the duty, whichever shall be greater, if the same is stamped

later than six months after the time of stamping.

The purchaser may appeal to the Collector of Stamp Duties for reduction of penalty

and the Collector of Stamp Duty may consider the purchaser’s appeal if he thinks

fit.

(e) Consequences of a document not duly stamped

A document which is not stamped or insufficiently stamped is not void or

unenforceable for that reason alone. However, such document may be rejected as

evidence if it is required to be produced before the Court. In that event, the party

who wishes to produce the unstamped or insufficiently stamped document will have

to pay the stamp duty payable and penalty before such document can be received

as evidence.

Notwithstanding the abovementioned proposition in law, the Legal Profession

(Practice and Ettiquette) Rules 1978 has provided that it is unethical for a lawyer to

object to such documents from being produced unless the objection goes to the root

of the subject matter of the litigation.