Introduction
 
Never before in the last forty years has the law on stamp duty received as much media coverage as in recent months. This is largely due to the implementation of the self-assessment stamp duty system (“STSDS”) from 1 January 2026.
 
The STSDS will be implemented in three phases:
 

 
From the Government’s perspective, the STSDS will shift the responsibility for determining the appropriate head of charge under which stamp duty is payable on instruments to the party who is liable to pay the stamp duty chargeable on the instrument under the Stamp Act 1949 (“the Act”). This transfer of responsibility is significant as the tax payer may be subject to additional stamp duty and penalties in the event that the instrument has been wrongly or insufficiently stamped.
 
Among the offences specified in the Act¹ that are relevant to the STSDS are: 

Penalties for these offences range from RM200 to RM10,000 and in the case of fraud, RM20,000.
 
In addition, the Collector of Stamp Duties has the right under section 50A of the Act to recover the shortfall arising from any error or under assessment of stamp duty or penalty.
 
The Government has not responded to recent calls by certain tax practitioners to defer the implementation of the STSDS.² Instead, the Government has issued an assurance that the Inland Revenue Board will not impose penalties during the first year of the STSDS for applications submitted from 1 January 2026 to 31 December 2026, to ease taxpayers into the new regime.³
 
As it is likely that the implementation of the STSDS will proceed as scheduled on 1 January 2026, we highlight six pointers that may, in appropriate circumstances, assist taxpayers to safely navigate the uncharted waters of assessing stamp duty payable on instruments under the new self-assessment regime.
 
1.     Electronic instruments
 
It is common knowledge that stamp duty is payable on an instrument, i.e. a written document, and not a transaction. If a transaction can be effected without an instrument, no stamp duty will be payable.
 
However, taxpayers should note that arising from an amendment made to section 2 of the Act under section 52(b) of the Finance (No. 2) Act 2023, the expressions “in writing” or “written” have been amended to include any “electronic record or transmission which is in an electronically readable form.” Although the scope of this definition has yet to be fully tested in the Malaysian courts, the existence or use of digital copies of an instrument could attract stamp duty under the Act.
 
2.    Agreement for sale of assets / business
 
Under section 21 of the Act, an agreement made in Malaysia for the sale of goodwill or book debts⁴ will be chargeable with ad valorem stamp duty under item 32(a) or item 32(aa) of the First Schedule of the Act as if the agreement were a conveyance on sale. Thus ad valorem stamp duty will be payable on the agreement for the sale of goodwill or book debts regardless whether the parties subsequently effect the transfer of the goodwill or book debts by an assignment or similar instrument.
 
In Havi Logistics (M) Sdn Bhd v Pemungut Duti Setem [2025] 3 MLRA 1, the Federal Court held that the expression “goods, wares or merchandise” applies only to “trade goods” and not to other forms of moveable properties such as office furniture, photocopiers, computers, table and chairs. Thus, an agreement for the sale of movable property other than trade goods will be subject to ad valorem stamp duty under section 21 read with item 32(a) or item 32(aa) of the First Schedule of the Act. These provisions will not apply if the sale and transfer of such non-trade goods is effected without any written instrument.
 
3.  Meaning of “security”
 
Taxpayers should note that the expression “security” under the Act is not synonymous with “security” or “collateral”, such as a land charge, in commercial parlance. For the purposes of stamp duty law, a “security” includes an instrument that records an enforceable obligation for the payment of money (Independent Television Authority and Associated-Rediffusion Ltd v Inland Revenue Commissioners [1961] AC 427 (HL) @ 442 per Lord Radcliffe). Thus an agreement under which a party undertakes an unsecured obligation to pay another money would be a “security” for the purposes of the Act and the appropriate duty would depend on the nature of the payment obligation (e.g. see item 22(1)(a) and item 22(1)(b) of the First Schedule of the Act).
 
4.    Agreements evidenced by letters
 
Taxpayers should be mindful that for the purposes of the Act, an agreement need not be formal document signed by the contracting parties, and may be formalised through an exchange of correspondence. In such event, section 55(1) of the Act provides that where an agreement is effected by correspondence consisting of two or more letters, the agreement shall be deemed to be duly stamped if any one of the letters bears the proper stamp.
 
An unresolved question that arise from the above is whether an exchange of emails will be considered as “correspondence” by way of “letters”, and whether an agreement formalised through such means will be subject to section 55(1) and require at least one of the emails to be stamped.
 
5.    The contingency principle
 
The contingency principle applies where the consideration payable under an instrument is not ascertainable at the time of execution of the instrument, but the instrument stipulates a minimum or maximum consideration payable. For example, an agreement for the sale and purchase of shares provides that the consideration is to be determined at a future date (e.g. upon the issue of the audited financial statements of the subject company) and that such consideration shall not be less than an amount stipulated in the agreement. In such a situation, the stamp duty payable on instrument of transfer of the shares will be determined based on the minimum amount stated in the agreement.
 
Conversely, if the agreement mentioned above provides that the consideration shall not exceed an amount stipulated in the agreement, the stamp duty payable on the instrument of transfer of shares will be determined based on the maximum amount stated in the agreement.
 
If the agreement stipulates both a minimum and a maximum consideration, it is likely that the Stamp Office will calculate stamp duty based on the maximum contingent sum.
 
6.    The Separate and Distinct Matter Rule
 
Where an instrument contains or relates to several distinct matters, section 6(a) of the Act requires the instrument to be stamped for each of these matters as if the instrument is a separate instrument in respect of each of the matters.
 
For example, if an agreement provides for a term loan to be granted by A to B which is repayable by fixed sums at specified intervals, and a sale of certain book debts by A to B, the agreement will have to be stamped as a security for the term loan under item 22(1)(a) of the First Schedule of the Act and as a conveyance on sale of book debts under section 21(1) of the Act.
 
Comments
 
The Act is an archaic piece of legislation that is not easily comprehensible even, we daresay, to lawyers. Perhaps it would have been better if the Government had undertaken a wholesale revamp to modernise and simplify the provisions of the Act before transferring the heavy responsibility of assessing stamp duty to taxpayers.
 
We anticipate that the coming years will witness significant developments in Malaysian stamp duty jurisprudence in consequence of the challenges brought by the Inland Revenue Board against the assessments of stamp duty made by taxpayers.
 
 
Article by Sheba Gumis (Partner) and Kok Chee Kheong (Consultant) of the Corporate Practice of Skrine.
 
 

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