Financing Instruments by MSMEs for P2P Financing Exempted from Stamp Duty
31 December 2021
Investment notes or Islamic investment notes for peer-to-peer (‘
P2P’) financing executed by micro enterprises or small and medium enterprises, or between micro enterprises or small and medium enterprises and an investor or by a person authorised to act on behalf of the investor shall be exempted from stamp duty under the
Stamp Duty (Exemption) (No. 17) Order 2021 [P.U.(A) 487/2021] (‘
E.O.17/2021’) which comes into operation on 1 January 2022.
Conditions for exemption
To qualify for exemption under E.O.17/2021:
- the P2P platform must be operated by a P2P operator registered with the Securities Commission Malaysia (‘SC’); and
- the investment note or Islamic investment note must be executed on or after 1 January 2022 but not later than 31 December 2026.
Key definitions
For the purposes of E.O.17/2021:
- ‘micro enterprises’ or ‘small and medium enterprises’ means micro enterprises or small and medium enterprises as may be determined by the National Entrepreneur and Small and Medium Enterprises Development Council established under section 2A of the Small and Medium Industries Development Corporation Act 1995;
- ‘P2P platform’ means an electronic platform that facilitates directly or indirectly the issuance, execution or offering of an investment note or an Islamic investment note specified in the SC’s Guidelines on Recognized Markets; and
- ‘investment note’ or ‘Islamic investment note’ has the same meaning assigned to it under the Capital Markets and Services (Prescription of Securities and Islamic Securities) (Investment Note and Islamic Investment Note) Order 2016 [P.U.(A) 126/2016].
Comments
The exemption from stamp duty under E.O.17/2021 is one of the measures announced by the Finance Minister in the 2022 Malaysia Budget Speech. It should be noted that the exemption under E.O.17/2021 only applies to financing raised on P2P platforms by micro enterprises or small and medium enterprises, and not by other borrowers through such means.
Presently, the stamp duty payable on a financing instrument executed by a micro enterprise or small and medium enterprise under item 27(a)(i) of the First Schedule of the Stamp Act 1949 ranges from 0.05% to 0.50% of the principal amount secured under the instrument. The full exemption from stamp duty under E.O.17/2021 will no doubt encourage micro enterprises, and small and medium enterprises to raise financing through P2P platforms.
Alert by Kok Chee Kheong (Partner) and Tan Wei Liang (Associate) of the Corporate Practice of Skrine.
This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.