Key Highlights of the Stamp (Amendment) Bill 2016
The Stamp (Amendment) Bill 2016 (‘the Bill’) was tabled for first reading in the Dewan Rakyat (Lower House of Parliament) on 23 November 2016. The Bill proposes significant amendments to the current Stamp Act 1949. It seeks to impose more stringent requirements that will impact certain types of transactions and restructuring exercises and potentially increase the costs of doing business and entering into contracts.
8 key changes proposed under the Bill:
New self-assessment system introduced. The current official assessment system will be replaced with a self-assessment system. If a payer submits the return by an electronic medium, a payer may opt for self-assessment of the stamp duty. Where self-assessment is preferred, duty will be due and payable within 14 days of submission.
Powers of the Collector expanded. With the introduction of self-assessment, the power of the Collector will be expanded for the purposes of conducting an audit. The Collector may require a person to attend personally before him and will have rights to search or have access to buildings, premises, instruments and documents that he considers necessary. Obstruction or refusal to comply will be an offence punishable with a fine not exceeding RM10,000.
Period that a transferee company has to remain as beneficial owner of shares extended. For reconstructions and amalgamations, the period that a transferee company has to remain as beneficial owner in order to be entitled to exemption has been extended from 2 years to 3 years. If there’s any change in circumstances, each company which was a party to the instrument is required to inform the Collector of the changes within 30 days of its occurrence.
Entitlement for relief from stamp duty for transfers of property between associated companies subject to more stringent conditions. For transfers of property between associated companies, such property must not be disposed of within 3 years and the associated companies must remain associated for a period of 3 years of the date of conveyance or transfer.
Ad valorem duty imposed on the exchange of real property, regardless of whether the exchange involves a consideration. The exchange of real property with no consideration will be chargeable with nominal duty of RM10 only if:
- both transferor and transferee are the original owners of the real property in a partition or division;
- such exchange or real property is between any person and a Ruler of a State or the Government of Malaysia or of any State; or
- the exchange of real property is between husband and wife, parent and child, grandparent and grandchild or among siblings.
Ad valorem duty payable upfront on contracts for the sale of property, stock or marketable securities. Currently, such contracts would only be charged with nominal duty, and ad valorem duty would be charged on the instrument of conveyance or transfer. The Bill proposes that ad valorem duty will now be charged upfront on any contract for the sale of property, stock or marketable securities and the conveyance or transfer shall be chargeable with a fixed duty of RM10.
Further, the Bill proposes that where a purchaser of property has paid ad valorem duty but before conveyance takes place, enters into another contract to sell the property to a sub-purchaser, the subsequent contract shall also be charged with ad valorem duty.
Where ad valorem duty is paid but the contract is terminated and no conveyance takes place, application may be made to the Collector for refunds within 12 months after the contract is terminated.
Penalties have been introduced or increased for certain breaches. This includes a significant increase in late stamping penalties. Fines currently go up to RM100 or 20% of the deficient duty, whichever is greater, if stamping is late by more than 6 months. The Bill proposes to increase this to as high as RM100 or 4 times the deficient duty (whichever sum is greater). Further, where an instrument is not duly stamped in accordance with the First Schedule, the Collector may impose a penalty that is triple the amount of deficient duty.
Revision of Schedules – The First, Second, Third and Fifth Schedules to the Stamp Act are substituted with new schedules. The amount of stamp duty on the sale of property, stock, shares or marketable securities remains the same, with amendments to simplify the calculation of stamp duty.
What happens next?
The date for the second reading of the Bill has yet to be confirmed. It is expected that the Bill will be tabled in Parliament when it sits in early March 2017. If it is approved and Royal Assent is obtained, the Act will come into operation on a date to be notified in the Gazette.
If you have any questions or require any additional information, you may contact Sunita S. Sothi, Karin Lim or ZICO Law partner you usually deal with.
This alert is for general information only and is not a substitute for legal advice.