Proposed Amendments to the Stamp Act 1949 – Part 1
26 November 2024
On 19 November 2024, the Finance Bill 2024 (“
Finance Bill”) and the Measures for the Collection, Administration and Enforcement of Tax Bill 2024 (“
Tax Measures Bill”) were tabled for their first reading in the Dewan Rakyat (
House of Representatives) of the Malaysian Parliament.
Chapter IV of the Finance Bill and Part IV of the Tax Measures Bill set out proposed amendments to the Stamp Act 1949 (“
Act”). Among the proposed amendments under the Tax Measures Bill are provisions that set out the legal framework for the implementation of the self-assessment stamp duty system (“
STSDS”) that was announced in the 2025 Malaysian budget speech, which is to take effect in three phases commencing 1 January 2026
1.
Part 1 of this article provides a summary of the more significant amendments that have been proposed under the Finance Bill and the Tax Measures Bill, other than the proposed amendments to implement the STSDS which will be considered in Part 2.
PART A – THE FINANCE BILL
If the Finance Bill is passed by Parliament, the amendments set out below will come into operation on 1 January 2025 except for the new section 36CA, discussed in paragraph 2.1(a) below, which will come into operation on 1 January 2026.
| 1.0 |
Amendment of Section 20A (Exchange of real property) |
| 1.1 |
The existing section 20A will be re-numbered as section 20A(1) and will be amended as follows: |
| (a) |
in the main paragraph of subsection (1), by replacing the words “, any consideration is paid or given, or agreed to be paid or given, for equality” with the words “with or without consideration”; and |
| (b) |
in paragraph (1)(a), by replacing the words “the same ad valorem duty as a conveyance on sale for the consideration, and with that duty only” with the words “ad valorem duty as if it were a conveyance on sale”. |
| 1.2 |
By inserting a new section 20A(2) to provide that the instruments of transfer in respect of the following transactions will be chargeable with stamp duty of RM10.00 if no consideration is paid or given, or agreed to be paid or given: |
| (a) |
a partition or division of real property where both transferor and transferee are the original owners of the real property; |
| (b) |
an exchange of real property between any person and a Ruler of a State or the Government of Malaysia or any State; or |
| (c) |
an exchange of real property between husband and wife, parent and child, grandparent and grandchild or among siblings. |
| 1.3 |
Presently, the principal or only instrument of transfer in respect of an exchange or partitioning or division of real property is subject to ad valorem duty only for the amount of consideration that is paid or given for equality. The amended section 20A means that the principal or only instrument of transfer relating to an exchange or partitioning or division of real property will be subject to ad valorem duty under item 32(a) of the First Schedule of the Act on the full amount of the consideration or market value, whichever is greater, of the real property. |
| 2.0 |
New Sections 36CA and 36CB (Assessment and additional assessment in certain cases and minimum amount of duty) |
| 2.1 |
The following sections will be inserted after section 36C of the Act: |
| (a) |
section 36CA which, inter alia, empowers the Collector to: |
| (i) |
make an assessment or additional assessment within five years after the date the duty is or would have been paid, if it appears to him that no or insufficient duty has been paid on a chargeable instrument; and |
| (ii) |
make an assessment on an instrument, without limitation of time, where any fraud or wilful default or negligence has been committed in relation to stamp duty. |
| (b) |
section 36CB which provides that the notwithstanding any other provision of the Act, the minimum duty imposed on any instrument shall not be less than RM10.00, except for a cheque and contract note. |
| 2.2 |
As mentioned earlier, the new section 36CA will come into operation on 1 January 2026, that is upon the implementation of the self-assessment system for stamp duty. |
| 3.0 |
Amendment of section 47A (Penalty for late stamping) |
| 3.1 |
Section 47A(1) of the Act will be amended in the following respects: |
| (a) |
the present three-tiers of penalties for late payment of stamp duty on an instrument will be reduced to two-tiers as follows: |
| (b) |
The late payment penalties under the amended section 47A will also apply to late payment of stamp duty on cheques and promissory notes drawn outside of Malaysia which are to be stamped under section 43 of the Act. |
| 4.0 |
Amendment of First Schedule |
| 4.1 |
Item 12 (Assignment)
Presently, Item 12 provides that an assignment by way of security or of any security is subject to duty as a charge and an assignment upon a sale or otherwise is subject to duty as a conveyance. A new paragraph (c) will be introduced to provide for the stamp duty payable on an assignment of a life insurance policy as follows:
The proposed paragraph (c) of Item 12 of the First Schedule will significantly reduce the stamp duty payable on an assignment of a life insurance policy by way of gift or trust. |
| 4.2 |
Item 22(6) (Bond, Covenant, Loan etc.)
Item 22(6) will be amended as follows:
“Being the security for securing the payment or repayment of money for the purchase of goods (within the meaning given under the First Schedule of the Hire Purchase Act 1967) in accordance with the conventional hire purchase and Syariah principles any Syariah principles or conventional hire purchase.” *
* strike-through denotes deletions and underscoring denotes additions.
The Explanatory Statement to the Finance Bill states that the amendment clarifies that the instrument securing the payment or repayment of money for the purchase of any goods (as defined in the First Schedule of the Hire Purchase Act 1967) in accordance with any Syariah principles or conventional hire purchase will be chargeable with stamp duty of RM10.00.
According to Appendix 15 (Tax Measures) to the 2025 Malaysian budget speech, loan or financing agreements for the purchase of goods based on conventional Shariah principles such as Al Ijarah Thumma Al Bait are subject to stamp duty of RM10.00 under Item 22(6) of the First Schedule of the Act while loan or financing agreements for the purchase of goods other than hire purchase based on conventional Shariah principles such as Murabahah and Tawarruq are subject to ad valorem stamp duty rate of 5% and it is proposed that the imposition on stamp duty on loan and financing agreements based on Shariah principles be streamlined and be subjected to stamp duty of RM10.00. |
| 4.3 |
Item 29 (Cheques)
This item will be amended so that stamp duty on cheques will be increased from RM0.15 to RM1.00 per cheque. |
| 4.4 |
Item 32(e) (Transaction between trustee where beneficial interest in property passes)
Item 32(e) which provides that an instrument of transfer of property between trustees where beneficial interest passes is subject to duty at the rate set out in paragraphs (a), (b) or (c) of item 32, as applicable, will be amended to include a reference to paragraph (aa) of item 32 which was introduced on 1 January 2024 to, inter alia, provide that an instrument of transfer of specified property to a foreign company or a person who is not a citizen and not a permanent resident is subject to stamp duty at a flat rate of 4%. |
| 4.5 |
Item 49(a) (Lease or agreement for lease etc.)
Item 49(a) presently provides that stamp duty on a lease or agreement for lease of any immoveable property and for securing the payment for the provision of services or facilities or to any other matters or things in connection with such lease is to be calculated as follows:
This item will be amended to provide follows:
The two changes that arise from this amendment are as follows:
| (a) |
the exemption from stamp duty of the first RM2,400 of the average rent per year will be removed; and |
| (b) |
the three tiers of duty based on the duration of the lease will be changed to four tiers and the rate of stamp duty ranging from RM1.00 to RM4.00 will be amended to RM1.00 to RM7.00 for every RM250 of the average rent per year. |
|
| 4.6 |
Item 59 (Power or Letter of Attorney)
Presently the stamp duty for a power or letter of attorney under item 59 is RM10.00. This item will be replaced by the following:
 |
PART B – THE TAX MEASURES BILL
If the Tax Measures Bill is passed by Parliament, the amendments set out below will come into operation on 1 January 2025
| 5.0 |
Amendment of Section 74 (Fraud in relation to duty) |
| 5.1 |
The penalty for committing that may be imposed on a person who practises or is concerned in any act, contrivance or device not specifically provided by law, with intent to defraud the Government of any duty, will be amended from a fine of RM5,000 to a fine of not less than RM1,000 and not more than RM20,000 under the Tax Measures Bill. |
| 6.1 |
Various provisions of the Act will be amended to remove the reference to section 43 (Bills, cheques or notes drawn out of Malaysia) and to include a reference to Item 32(aa) (rate of duty payable on the transfer of certain types of property to a foreign company or a person who is not a citizen and not a permanent resident of Malaysia) of the First Schedule of the Act. |
COMMENTS
The most interesting proposal in relation to stamp duty in the 2025 Malaysian budget speech is the proposal to introduce the STSDS from 1 January 2026.
2 As mentioned earlier, the proposed amendments to establish the legal framework to implement STSDS are found mainly in Part IV of the Tax Measures Bill. The proposed section 36CA under the Bill is also a step for this purpose as it confers powers on the Collector to recover duty on insufficiently stamped instruments whether due to inadvertence, fraud, wilful default or negligence
3.
The proposal to amend the penalty of RM5,000 under section 74 of the Act for committing fraud in relation to stamp duty with a maximum sum not exceeding RM20,000 is overdue and it would not be unduly draconian to suggest that the maximum penalty should have been increased to a higher amount.
The proposed amendments set out in paragraphs 4.1 and 4.2 above were included in the various initiatives announced in the 2025 Malaysian budget speech
4. The other amendments set out in Chapter IV of the Finance Bill are new.
Article by Kok Chee Kheong (Partner) of the Corporate Practice and Victoria Low (Associate) of the Tax Practice of Skrine.
1 See Appendix 18 to the 2025 Malaysian Budget Speech.
3 See paragraphs 2.1(a) and 2.2 above.
4 Paragraph 192 and Appendix 14, and Appendix 15 of the 2025 Malaysian Budget Speech.
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.