Written by Lim Tse Hwei and Ashley Yip.
The passing of the Finance Bill 2024 on the 31st December 2024 introduced significant steps in refining and evolving Malaysia’s tax landscape, with several changes taking effect in January 2025. The Finance Act addresses key areas such as stamp duty, real property gains tax, global minimum tax and a review of our current income tax relief that impact both businesses and individuals.
This article focuses on the major changes to the Stamp Act 1949, against the backdrop of the 2025 Budget announcement.
Overview
All amendments come into operation on 1st January 2025, except Section 36CA, which comes into operation on 1st January 2026.
Operation date: 01.01.2025
Where there is an exchange of real property for any other real property, or a partition or division of any real property, the stamp duty payable will now be assessed as if it were a property sale, even if no consideration is involved.
However, a new subsection (2) allows a reduced stamp duty of RM10 where no consideration is involved if:
- concerning a partition or division, both the transferor and transferee are the original owners of the property involved; or
- concerning an exchange of real property, the exchange is between:
- any person and a Ruler of a State or the Government or a State; or
- spouses, parents and children, grandparents and grandchildren, or siblings.
Operation date: 01.01.2026
A significant change announced in the 2025 Budget was the introduction of a self-assessment system for stamp duty (“SASDS”). This means that taxpayers are required to independently evaluate the value of stamp duty payable on their instruments, electronically submit the relevant instruments, and remit payment for the self-assessed duty.
This is a shift from the current practice of taxpayers merely submitting instruments for adjudication of stamp duty by the Inland Revenue Board.
SASDS will be implemented in phases, based on the type of document or transaction:
- Rentals, leases, general encumbrances / documents and securities (01.01.2026)
- Transfer of property (01.01.2027)
- Other instruments (01.01.2028)
Thus, the new Section 36CA allows IRB to make an assessment or additional assessment if it finds that an instrument has been insufficiently assessed. This assessment can be raised up to a period of five years after the insufficient duty was paid (or would have been paid).
Subsection (2) empowers the IRB to make a finding of fraud, wilful default, or negligence in relation to duty, and make an assessment to make good any loss of duty attributable to the fraud, wilful default or negligence. This should be read with Section 74 of the Stamp Act, which makes any fraudulent act or contrivance with intent to defraud the Government of any duty an offence punishable by fine.
Operation date: 01.01.2025
RM10 is the minimum amount of duty for any instrument where duty falls below that amount, except for cheques and contract notes.
Operation date: 01.01.2025
Penalties for late stamping will also apply to the stamping of bills, cheques and notes drawn out of Malaysia (under Section 43) beyond the period specified.
The amendment effectively increases the penalty for late stamping:
- RM50 or 10% of the deficient duty (whichever is greater) if stamped within three months after the time for stamping; or
- RM100 or 20% of the deficient duty (whichever is greater) if stamped past three months after the time for stamping.
Amendments to the First Schedule
Operation date: 01.01.2025
An assignment of a policy of life insurance via gift or trust will attract stamp duty, calculated based on the sum insured of the life insurance:
- RM10 if the sum inured does not exceed RM100,000;
- RM100 if the sum assured exceeds RM100,000 but does not exceed RM500,000;
- RM500 if the sum assured exceeds RM500,000 but does not exceed RM1,000,000; and
- RM1,000 if the sum assured exceeds RM100,000,000.
An assignment of a policy of life insurance in any other case will be assessed as a conveyance.
The amendment is a rephrasing of Item 22(6), effectively making it clear that Subitem 22(6) applies to instruments governed by any Syariah principles.
Stamp duty is increased from RM0.15 to RM1.
Stamp duty payable now extended to reflect Subitem 32(aa) concerning conveyances to foreign companies, non-citizens and non-permanent residents.
The exemption of stamp duty where the average rent and other considerations for a year is RM2,400 or less is removed.
The stamp duty payable across the board is now calculated as follows: For every RM250 or part thereof:
- RM1 for a lease term of less than 1 year (no changes);
- RM3 for a lease term exceeding 1 year but less than 3 years;
- RM5 for a lease term exceeding 3 years but less than 5 years; and
- RM7 for a lease term exceeding 5 years.
Ad valorem duty will now be imposed on instruments with conveyance features, as opposed to the previous fixed stamp duty of RM10.