Malaysia_ Stamp duty

 Malaysia is introducing the Stamp Duty Self-Assessment System (SDSAS) progressively, based on the nature of the instruments or agreements involved. Concurrently, the tax authorities have also launched the Stamp Duty Audit Framework (SDAF), which came into effect on January 1, 2025. This framework aims to ensure that stamp duty audits are conducted with fairness, transparency, and impartiality, clearly defining the rights and obligations of those being audited and the auditing officers.

Considering these developments, taxpayers should anticipate a rise in stamp duty audits in the near future. This underscores the importance of having a robust stamp duty risk management framework in place. It is now essential for taxpayers to possess a thorough understanding of stamp duty regulations and to establish clear protocols for ensuring all necessary documents are stamped promptly.





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Future obligations under the upcoming Stamp Duty Self-Assessment System (SDSAS) and the implications of the Stamp Duty Audit Framework (SDAF).

Currently, if your Malaysian entity isn't paying stamp duty, it likely means the types of agreements or instruments you are currently executing fall under exemptions or are not subject to stamp duty under the existing Stamp Act 1949. However, with the phased implementation of SDSAS, the scope and procedures for stamp duty might change, and it's crucial to understand potential future liabilities.

Here's a breakdown of what you need to consider:

Types of Agreements That Typically Require Stamping in Malaysia:

While the specific agreements requiring stamping under SDSAS might have some modifications upon full implementation, the following categories of instruments are generally subject to stamp duty in Malaysia:

  • Transfer of Property: This includes Sale and Purchase Agreements (SPA) for land and buildings, Memorandums of Transfer (MOT), and assignments. Stamp duty is typically levied on the consideration or market value of the property, whichever is higher.
    • Example: When your entity purchases a new office building in Malaysia, the Sale and Purchase Agreement and the subsequent transfer documents would likely be subject to stamp duty.
  • Lease/Tenancy Agreements: Agreements for the lease or tenancy of properties for a term exceeding a certain period (usually three years) are subject to stamp duty. The duty is calculated based on the annual rent and the lease duration.
    • Example: If your entity leases office space for five years, the tenancy agreement would likely require stamping.
  • Loan Agreements and Security Documents: Agreements for loans, mortgages, charges, and other security documents are generally subject to stamp duty, calculated based on the loan amount.
    • Example: If your entity takes out a loan from a bank in Malaysia, the loan agreement and any related security documents would likely be subject to stamp duty.
  • Share Transfers: Instruments transferring shares in a Malaysian incorporated company are subject to stamp duty, calculated on the value of the shares transferred.
    • Example: If your entity acquires shares in another Malaysian company, the instrument of transfer would require stamping.
  • Contracts or Agreements for Sale of Goods (under certain circumstances): While less common, certain types of contracts for the sale of goods might be subject to stamp duty if they fall under specific categories outlined in the Stamp Act.
  • Other Instruments: Various other instruments such as trust deeds, powers of attorney, and certain types of insurance policies can also be subject to stamp duty depending on their nature and provisions.

Determining Which Party Pays for Stamp Duty:

The liability for stamp duty is generally specified in the relevant legislation or agreed upon by the parties in the agreement. Here's a common breakdown:

  • Transfer of Property: Typically, the purchaser or the transferee is responsible for paying the stamp duty on the transfer documents (e.g., MOT). The stamp duty on the Sale and Purchase Agreement might be split or borne by the purchaser, depending on the terms of the agreement.
  • Lease/Tenancy Agreements: Usually, the tenant is responsible for paying the stamp duty on the lease or tenancy agreement.
  • Loan Agreements and Security Documents: Generally, the borrower is responsible for the stamp duty on loan agreements and related security documents.
  • Share Transfers: Typically, the purchaser or the transferee of the shares is liable for the stamp duty.
  • Other Agreements: The party liable for stamp duty on other types of agreements will depend on the specific nature of the instrument and the provisions of the Stamp Act. The agreement itself may also specify who bears the cost.

Implications of SDSAS and SDAF:

  • Stamp Duty Self-Assessment System (SDSAS): This system shifts the responsibility of calculating and paying stamp duty to the taxpayers (or their appointed agents). It is expected to streamline the stamping process but also requires taxpayers to have a thorough understanding of the stamp duty rules and regulations. The phased implementation suggests that different types of instruments will come under this self-assessment regime at different times. You will need to stay informed about the implementation schedule to understand when your entity's agreements will fall under SDSAS.
  • Stamp Duty Audit Framework (SDAF): Effective from January 1, 2025, the SDAF indicates a more structured and potentially more frequent audit environment for stamp duty compliance. This reinforces the need for taxpayers to ensure they are correctly assessing and paying stamp duty on all liable instruments. The framework emphasizes fairness and transparency, outlining the rights and responsibilities of both the tax authorities and taxpayers during an audit.

Recommendations for Your Malaysian Entity:

  1. Identify Your Agreements: Conduct a thorough review of all types of agreements your Malaysian entity enters into.
  2. Understand Current Exemptions: Determine if the agreements you currently execute benefit from any specific exemptions under the existing Stamp Act.
  3. Monitor SDSAS Implementation: Stay updated on the phased implementation schedule of the Stamp Duty Self-Assessment System to understand when different types of your agreements will be subject to the new regime.
  4. Seek Professional Advice: Engage with tax advisors or legal professionals in Malaysia to understand the specific stamp duty implications for your current and future agreements under SDSAS and the increased audit scrutiny under SDAF. They can help you:
    • Identify which of your agreements are likely to be subject to stamp duty.
    • Determine the party responsible for payment.
    • Establish proper protocols for timely stamping under SDSAS.
    • Develop a robust stamp duty risk management strategy to ensure compliance and avoid potential penalties during audits.
  5. Internal Training: Consider providing technical training on Malaysian stamp duty to relevant personnel within your entity to ensure awareness and compliance.
  6. Health Checks/Reviews: Conduct health checks or reviews of your existing and template agreements to proactively identify potential stamp duty liabilities.
  7. Governance Structure: Review or design a robust governance structure for stamp duty compliance to ensure all relevant documents are identified, stamped correctly, and in a timely manner.

By taking these steps, your Malaysian entity can proactively prepare for the changes brought about by SDSAS and SDAF, ensuring compliance and mitigating potential risks associated with stamp duty. Don't hesitate to reach out if you'd like to discuss how we can support you with these recommendations.


https://assets.kpmg.com/content/dam/kpmg/my/pdf/changes-in-stamp-duty-administration-and-stamp-duty-audit-framework.pdf


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