STAMP DUTY EXEMPTION IN MALAYSIA

Authored by Dylan Chong. You may email him at dc@jc-law.my

Stamp Duty for Memorandum of Transfer

Stamp Duty is imposed on the instrument to transfer such as property and share. The instrument of transfer can be the share transfer form or Memorandum of Transfer.

The stamp duty assessment will be based on the value of the property. For example, based on the Stamp Duty Act 1949 (Act 378), Item 32 of Schedule 1, the stamp duty imposed on the Memorandum of Transfer is as follow:

Stamp Duty Exemption on Memorandum of Transfer

In the latest Stamp Duty (Exemption) Order 2021 [P.U.(A) 53] on instrument of transfer such as Memorandum of Transfer (MOT).

This Order comes into force on 01.01.2021.

The buyer will be entitled for a stamp duty exemption for the MOT and only need to pay a nominal fee of RM10 provided:

• Sale and purchase agreement signed on or after 01.01.2021 and not later than 31.12.2025
• Apply to one (1) unit of residential property only;
• the buyer or acquirer never inherit any property by way of inheritance or gift
• apply only to residential property which is either a condominium, apartment or a flat obtained for purposes as a dwelling house
• does not apply to service apartment, SOHO, SOVO, SOFO
• the individual has to be a Malaysia citizen (Permanent Resident not entitled)  

Stamp duty on Loan Documentation

Borrower will need to check two things, what is the payable stamp duty for loan sum borrower and also the exemption involved (if any).

The general rule is that, stamp duty assessable on loan amount excluding the insurance coverage (MRTA or MRTT). The formula is loan sum x 0.5% 

Example: RM550,000 (include MRTA RM50,000)

RM550,000 – RM500,000 = RM50,000 (MRTA sum)

RM500,000 x 0.5% = RM2,500

The total stamp duty payable on the loan sum is RM2,500

Exemption under the stamp duty payable on the loan sum

The latest Stamp Duty (Exemption) (No. 2) Order 2021 [P.U.(A) 54] on loan documentation allows for exemption on the stamp duty payable on loan documentation.

This Order comes into force on 01.01.2021.

The requirement to be fulfilled are as follow:

• Sale and Purchase Agreement (SPA) signed on 01.01.2021 and not later than 31.12.2025;
• Apply to one (1) unit of residential property only;
• the individual (buyer/acquirer) has never owned any residential property via inheritance or gift by family member or etc
• residential property refers to condominium unit, apartment, flat obtained for purposes as a dwelling house
• does not apply to service apartment, SOHO, SOVO, SOFO
• the individual must be a Malaysian (Permanent Resident not entitled)

The individual has to affirm a statutory declaration confirming that he has never owned any residential property as per (3) above mentioned.

Stamp Duty applicable on the transfer from parent to children

The law on the stamp duty governing the transfer of immovable property from parent to children and vice versa is governed under the Stamp Duty (Remission) (No. 2) Order 2019 [P.U. (A) 369). 

This Order comes into force on 01.01.2020.

This Order allows for 50% remission on any stamp duty assessed upon the value of the property when it involves a transfer from parent to children, or vice versa from children to parent.

This Order recognizes step children and also adopted children pursuant to the Adoption Act 1952 or Adoption Ordinance 1960 (in the state of Sabah) or Adoption Order 1958 (Sarawak Cap 91).

This does not apply to a transfer among sibling, or from grandchildren to grandparent. The law only recognizes direct lineage of the family tree.

Stamp Duty for the transfer among spouses/ husband to wife

The Stamp Duty (Exemption) (No. 10) Order 2007 [P.U. (A) 420/2007] allows for full 100% exemption on any transfer inter vivos (transfer during lifetime) between a husband and wife.

This Order comes into force on 08.09.2007.

Stamp Duty for residential property purchased under House Ownership Campaign (HOC)

There are respectively two full exemptions given under the HOC stamp duty exemption:

• loan documentation stamp duty
• memorandum of transfer 

The requirements are:

• the value is more than RM300,000 to RM2,500,000
• the sale and purchase agreement is signed between individual and a property developer
• the developer’s project has to have a 10% discount and registered with the real estate association (REHDA, SHAREDA, SHEDA).
• the sale and purchase agreement is signed between 01.06.2020 and has been further extended to 31.12.2021
• the residential property refers to a house, condominium, apartment or flat used for purposes as a dwelling house includes service apartment, small office home office (SOHO) which has obtained approval under the Housing Development (Control and Licensing) Act 1966, or No. 24 of 1978 for Sabah, or Cap 69 for Sarawak
• individual must be Malaysian Citizen (Permanent resident is not entitled)

For the stamp duty of MOT under HOC, the first RM1,000,000 is exempted. However, any value exceeded RM1,000,000 will be assessed on a 3% rate. [see P.U. (A) 217]

Stamp Duty on Rent to Own Scheme

The law applicable is the Stamp Duty (Exemption) (No. 4) Order 2019 [P.U. (A) 394]. It applies to any instrument of transfer entered into between the transferor and transferee under a rent to own scheme.

The requirement is as follow:

• property value not exceeding RM500,000 (based on the SPA purchase price)
• sale and purchase agreement executed between 01.01.2020 until 31.12.2022
• SPA to be stamped
• the rent to own agreement to be signed between the individual and the financial institution is on or after 01.01.2020 and not later than 31.12.2022.
• the individual has never owned any residential property by way of inheritance or gift

Rent to Own scheme is offered under existing financial institution such as Maybank. It is termed as “HouzKEY”.

What does Houzkey provides:

• borrower no need to pay down payment for the developer’s unit
• Houzkey offers 100% financing to cover down payment
• low monthly payment upon receiving vacant possession to enjoy the best rates (usually at 2.7%)
• the purchaser is given option to sell off the house purchased after 5 years.
• It is based on ijarah concept (leasing agreement) with Houzkey

Stamp Duty applicable on loan and instrument of transfer for LPPSA

The applicable law is Stamp Duty (Exemption) Order 2017 [P.U.(A) 40] which came into force on 01.01.2017.

It applies to all instrument executed in relation to any home financing facility under the Public Sector Home Financing Board Act 2017 [Act 767]. In Malay, it is known as LPPSA or Lembaga Pembiayaan Perumahan Sektor Awam.

It refers to all stamp duty payable for loan documentation and Memorandum of Transfer to be entitled for 100% exemption. 

Stamp Duty payable for the transfer by way of Probate

There are two situations:

• transfer to the beneficiary – to pay RM10 stamp duty or nominal stamp duty under Item 32(i) of the First Schedule of the Stamp Act 1949 (Act 378)

• transfer to a third party/buyer under Order for sale – to pay ad valorem stamp duty under Item 32(a), First Schedule of the Stamp Act 1949 (Act 378)

see also: https://jc-law.my/applying-for-letters-of-administration-in-malaysia/

see also: https://jc-law.my/wills-drafting/

Stamp Duty for a direct transfer case – involved perfection of title

This situation involved two scenarios:

Scenario 1 – Property with title (but with restriction in interest)

• property with restriction in interest would need to get the developer’s confirmation on whether they agree for a direct transfer or not
• in most cases, developer would reject the approval for a direct transfer
• the owner will have to get it transfer from the developer to them and to pay the stamp duty.
• If there is a buyer, the owner has to transfer to the buyer and the buyer has to bear the second stamp duty assessed.

Scenario 2 – Property with title (with no restriction interest)

• for property with no restriction, usually freehold property
• the owner may write in to the developer to get confirmation for direct transfer
• this way, the stamp duty payable is one time directly from developer to the buyer (skip the owner)
• however, the owner may need to pay administrative fee fixed by the developer

Authored by Dylan Chong

The contents of this publication are given as general information for reference purposes only and do not constitute the firm’s legal advice. For any specific matter or legal issue, please do not rely on this publication but make sure to consult a legal adviser. We would be delighted to answer your questions, if any.