Types of Stamp Duty in Malaysia
Stamp duty is a crucial component of taxation in Malaysia. It is a tax imposed on various instruments/documents to legitimize their legality and enforceable value. To understand stamp duty comprehensively, let’s delve into its different types, as well as the rates and exemptions associated with each.
Types
of Stamp Duty in Malaysia
In Malaysia, there are two primary types of stamp duty: ad valorem duty and fixed duty. Each type applies to specific documents and transactions, with different rates and regulations.
Ad Valorem Duty
Ad valorem duty is a type of stamp duty that is calculated based on the value of the document or transaction. It is commonly applied to various legal documents and agreements, such as property transfers, loan agreements, and share transfers. The rate of ad valorem duty varies depending on the nature of the document or transaction.
For example, when it comes to property transfers, the ad valorem duty is calculated based on the market value of the property. The rate can range from 1% to 4% of the property value, depending on the state in which the property is located. This duty is payable by the buyer or transferee of the property.
In the case of loan agreements, the ad valorem duty is calculated based on the loan amount. The rate can range from 0.5% to 0.75% of the loan amount, depending on the duration of the loan. This duty is usually payable by the borrower.
When it comes to share transfers, the ad valorem duty is calculated based on the value of the shares being transferred. The rate can range from 0.1% to 0.3% of the share value, depending on the type of shares and the stock exchange on which they are listed. This duty is payable by the buyer or transferee of the shares.
For example, when it comes to property transfers, the ad valorem duty is calculated based on the market value of the property. The rate can range from 1% to 4% of the property value, depending on the state in which the property is located. This duty is payable by the buyer or transferee of the property.
In the case of loan agreements, the ad valorem duty is calculated based on the loan amount. The rate can range from 0.5% to 0.75% of the loan amount, depending on the duration of the loan. This duty is usually payable by the borrower.
When it comes to share transfers, the ad valorem duty is calculated based on the value of the shares being transferred. The rate can range from 0.1% to 0.3% of the share value, depending on the type of shares and the stock exchange on which they are listed. This duty is payable by the buyer or transferee of the shares.
Fixed Duty
Fixed duty is a type of stamp duty that is charged at a fixed rate, regardless of the value of the document or transaction. It is commonly applied to various legal documents, such as tenancy agreements, insurance policies, and powers of attorney.
For example, when it comes to tenancy agreements, the fixed duty is charged at a rate of RM10 for agreements with a term of less than one year, and RM20 for agreements with a term of one year or more. This duty is usually shared equally between the landlord and the tenant.
In the case of insurance policies, the fixed duty is charged at a rate of RM10 for policies with a premium of RM1,000 or less, and RM20 for policies with a premium of more than RM1,000. This duty is payable by the policyholder.
When it comes to powers of attorney, the fixed duty is charged at a rate of RM10. This duty is payable by the person granting the power of attorney.
It is important to note that stamp duty is a legal requirement in Malaysia, and failure to pay the duty can result in penalties and legal consequences. Therefore, individuals and businesses need to understand the types of stamp duty applicable to their transactions and ensure compliance with the relevant regulations.
For example, when it comes to tenancy agreements, the fixed duty is charged at a rate of RM10 for agreements with a term of less than one year, and RM20 for agreements with a term of one year or more. This duty is usually shared equally between the landlord and the tenant.
In the case of insurance policies, the fixed duty is charged at a rate of RM10 for policies with a premium of RM1,000 or less, and RM20 for policies with a premium of more than RM1,000. This duty is payable by the policyholder.
When it comes to powers of attorney, the fixed duty is charged at a rate of RM10. This duty is payable by the person granting the power of attorney.
It is important to note that stamp duty is a legal requirement in Malaysia, and failure to pay the duty can result in penalties and legal consequences. Therefore, individuals and businesses need to understand the types of stamp duty applicable to their transactions and ensure compliance with the relevant regulations.
Ad Valorem Duty
Ad valorem duty is a type of stamp duty imposed on certain legal documents based on their value. The duty is calculated as a percentage of the transaction value, making it proportionate to the transaction’s worth. This type of stamp duty is commonly applicable to property-related transactions, including sales and purchases, transfers, and leases.
Fixed Duty
Unlike ad valorem duty, fixed duty imposes a predetermined fixed amount for specific types of transactions. Regardless of the value of the transaction, the same amount is payable. This type of stamp duty is typically applicable to agreements, contracts, and instruments related to finance and loans.
Different Rate of
Stamp Duty in Malaysia
The rate of stamp duty varies depending on the type of transaction involved. Let’s explore some of the different rates applicable:
Properties
When it comes to property transactions, stamp duty rates vary based on the type of property and its value. For example, the stamp duty rate for the transfer of residential property ranges from 1% to 4% of the property’s market value. On the other hand, stamp duty for the transfer of commercial properties is set at a flat rate of 3%.
Non-listed shares, stock, or marketable securities
Stamp duty is also applicable when transferring non-listed shares, stocks, or marketable securities. The current rate for such transactions is 0.3% of the total value, which can impact the overall purchase price.
Shares or stock listed on Bursa Malaysia
For transactions involving shares or stocks listed on Bursa Malaysia, the stamp duty rate is 0.1% of the total value. Investors and business services involved in the sale and purchase of these financial instruments need to account for these costs in their calculations.
Listed marketable securities
When it comes to transactions involving listed marketable securities, the stamp duty rate is 0.1% of the total value. This rate is an essential piece of information for buyers and sellers in the financial market.
Service Agreements and Loan Agreements
Service agreements and loan agreements are subject to stamp duty as well. The rate for these types of agreements ranges from RM10 to RM500, depending on the value of the transaction. This is an important consideration for both main and additional support services in a business context.
Stamp Duty
Tax Exemptions
While there are various stamp duty obligations, Malaysia also provides certain exemptions to encourage specific activities. Let’s explore some instances where stamp duty exemptions apply:
Merger and acquisition
Stamp duty exemptions are granted for agreements related to mergers and acquisitions, promoting corporate growth and development.
Financing instrument
Stamp duty exemptions are also applicable to financing instruments, encouraging financial transactions and investment activities.
Instrument of transfer
When the transfer of property or shares occurs due to a gift, stamp duty exemptions may be granted.
Purchase of first residential property
First-time homebuyers in Malaysia may be eligible for stamp duty exemptions on their first residential property purchase, lightening the financial burden.
Abandoned housing projects
First-time homebuyers in Malaysia may be eligible for stamp duty exemptions on their first residential property purchase, lightening the financial burden.
Penalty
Failure to pay the required stamp duty within the specified timeframe may result in penalties. It is crucial to fulfill stamp duty obligations promptly to avoid any potential penalties and legal implications.
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FAQ
What is Stamp Duty in Malaysia?
Stamp duty in Malaysia is a tax imposed on legal documents that validates and enforces transactions, providing security and legal recourse.
What is the stamping fee for a business agreement in Malaysia?
The stamping fee for a business agreement in Malaysia varies based on the transaction value, with rates ranging from RM10 to RM500.
How do you calculate stamping costs?
Stamp duty cost is typically calculated as a percentage of the transaction value or at a fixed rate for certain documents, as stipulated by the relevant legal authority or law governing the transaction.
What is the rate for stamping fees?
Stamping fees in Malaysia usually range from RM10 for general agreements to 1-4% for property transactions, based on the property’s value and the relationship between the parties, but you should check the most current rates as they may have changed.