Stamp (Amendment) Bill 2016 - PwC · agreement made in Malaysia and is effected by an ... Stamp...

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TaXavvyStamp (Amendment) Bill 2016

9 December 2016 | Issue 11-2016

2TaXavvy Issue 11-2016 | 9 December 2016 | Stamp (Amendment) Bill 2016

Inside this issue

Key highlights

• Properties and Shares Sale and Purchase Agreements subject to ad valorem stampduty

• Reduction of stamp duty rates for unquoted shares• Requirement to submit return• Instruments chargeable with duty• Relief in respect of error or mistake• Adjudication and assessment as to proper stamp/Introduction to self assessment• Powers of the Collector of Stamp Duties• Power to appoint agents• Recovery of duty from executor• Definition of “small and medium enterprise”

3

Stamp duty relief

• Stamp duty relief in case of reconstructions or amalgamations of companies• Stamp duty relief in case of transfer of property between associated companies

7

Stamp duty administration• Requirement to keep records• Loss of stamp certificate• Allowance for spoiled stamps

8

Offences and penalties

• Increase in penalties• Recovery of duties, penalties and other sums• Compoundable offences

9

Savings and transitional provisions 10

Let’s talk 11


Key highlights

Welcome to our TaXavvy which brings to you thekey proposals of Stamp (Amendment) Bill 2016(the “Amendment Bill”).

The proposed amendments will be effective uponcoming into operation of the Stamp (Amendment)Act (the “Amendment Act”).

Property and Share Sale and PurchaseAgreements subject to ad valoremstamp duty

It has been proposed ad valorem duty will becharged on any contract or agreement made inMalaysia for the sale of any estate, equitable estateor interest in any property including stock ormarketable securities.

This effectively means the imposition of advalorem stamp duty will be on the contractor agreement instead of the memorandumof transfer.

For transaction where there is no contract oragreement made in Malaysia and is effected by aninstrument whereby any –

(a) equitable estate or interest in any property;

(b)estate or interest in any property; or

(c) stock or marketable securities

is conveyed or transferred, such instrument shallbe charged with the ad valorem duty as if it werean actual conveyance. The stamp duty is to be paidby the purchaser.

Where ad valorem duty has been paid, theconveyance or transfer made to the purchaser shallbe chargeable with a fixed duty of RM10.

The ad valorem duty paid can be refunded by theCollector of Stamp Duties (“Collector”) based onthe following circumstances–

(a) after the contract, agreement or assignmenthas been rescinded, annulled or cancelled;and

(b) the instrument in respect of such contract,agreement or assignment has not beenregistered in accordance with any writtenlaw.

An application for refund shall be made within12 months after the occurrence of events set outunder (a) and (b) above.

The above proposed change is not applicable to thesale of property pursuant to a scheme which is inaccordance with the principles of Shariah wheresuch sale is strictly required for the purpose ofcomplying with such principles.

Ad valorem stamp duty is imposed onthe transfer of shares in unquotedcompanies on Bursa Malaysia

The transfer of shares attract stamp duty at the advalorem stamp duty rate of 0.3% of the price orvalue of any shares on the date of transfer,whichever is the greater.

The exception to the above is the transfer of sharesin unquoted companies on Bursa Malaysia whichwill attract ad valorem stamp duty at the rate of

0.1%.


Requirement to submit return

A new requirement has been proposed where everyperson is required to furnish a return in theprescribed form together with the executedinstrument chargeable with duty.

Any person who, without reasonable excuse, failsto furnish a return commits an offence and shall,on conviction, be liable to a fine not exceedingRM10,000.

Instruments chargeable with dutyunder the Stamp Act 1949 (“StampAct”)

Currently, there are other legislations whichprescribe stamp duty treatment on instruments.

A proposal is made to delete the words “and in anywritten law for the time being in force” from theStamp Act. This provides the chargeability to andexemption from stamp duty on instruments issubject to the Stamp Act only.

It is proposed that all instruments chargeable withduty shall be duly stamped.

Relief in respect of error or mistake

A new section is introduced to allow a duty payerwho has paid excessive stamp duty by reason oferror or mistake to apply for relief from theCollector.

The application for relief must be made in writingand within the specified time as follows:

Adjudication and assessment as toproper stamp/Introduction to selfassessment

It is proposed that a person is allowed to furnish areturn by way of electronic medium.

The proposed amendments also allow the Collectorto make an assessment or the duty payer can optfor self-assessment.

a) Where an assessment is made by theCollector, the duty shall be due and payablewithin 14 days from the date of assessment.

b) In the case of self-assessment, the return isdeemed to be an assessment made by theCollector and the deemed assessment shall bedue and payable within 14 days from the datethe return is furnished.

Notwithstanding the above, the Collector isempowered to make an assessment where theduty payer opts for self-assessment.

In addition, the proposed amendment also allowsthe Collector to make an assessment where aninstrument chargeable with duty is not dulystamped.

Instruments Deadline for submission ofthe application for relief

For executedinstrumentswhich are dated

Within 12 months from the dateof the instrument

Forinstrumentswhich are notdated

Within 12 months after theexecution of the instrument ifexecuted in Malaysia or ifexecuted outside Malaysia, whenit was first received in Malaysia

Key highlights (Cont’d)



Powers of the Collector

With the introduction of self-assessment, thepower of the Collector is expanded for the purposeof conducting audit.

The Collector may require a person to produce forexamination any instrument, book, account, recordor other document; to attend personally before himand produce for examination any instrument,book, account, record or other documents; andsearch such lands, buildings and places to whichthe Collector has access.

Obstruction or refusal to permit entry, refusal toproduce instrument, book, account, record or otherdocuments and failure to provide reasonablefacilities and assistance for purposes of audit shallbe an offence.

The proposed amendment also seeks to increasethe maximum fine from RM250 to RM10,000 toreflect the severity of any non-compliance.

Power to appoint agents

A new section is introduced to allow the Collectorto appoint any person to be the agent of the dutypayer and that person shall be required to pay anyduty or penalty due under the Stamp Act on behalfof the duty payer from any moneys including saleproceeds or rents, which may be held by him for ordue by him to the duty payer.

Failure of the agent to pay such duty or penaltyrenders the duty and penalty as a debt due to theGovernment.

It is also proposed that the Collector may requireany person to give him information as to anymoneys, funds or other assets which may be heldby him for, or of any moneys due by him to theduty payer.

If the agent is aggrieved by the appointment, hemay object to the appointment by notice in writingto the Collector within 14 days from the date ofappointment.

Recovery of duty from executor

The Amendment Bill introduces a new sectionwhich allows the Collector to recover any unpaidduty, penalty or sum due from a deceased from theexecutor of the estate of the deceased.

This proposal provides that the amount of anyduty, penalty or sum payable by the executor shallbe a debt due from and payable out of the estate ofthat deceased. Further, the section also stipulatesthat the executor shall not distribute any of theassets of the deceased unless the executor hasmade provision for the payment in full of duty,penalty or sum which the executor knows or mightreasonably expect to be payable by the executor.

Failure to make the provision shall, on conviction,be liable to a penalty equal to the amount of duty,penalty or sum payable. Where there are severalexecutors, the executors shall be jointly andseverally liable.


Definition of “small and mediumenterprise” (“SME”)

The definition of SME is amended as follows -

a) in relation to the manufacturing activities, anenterprise with sales turnover not exceedingRM50 million or full-time employees notexceeding 200 people; or

a) in relation to the services, and other sectors, anenterprise with sales turnover not exceedingRM20 million or full-time employees notexceeding 75 people.

Where a loan is obtained by a SME, the followingstamp duty rates will apply -

Loan (RM) Stamp duty rate

Up to RM250,000 0.05%

Between RM250,001 toRM1,000,000

0.25%

In excess of RM1,000,000 0.5%



Stamp duty relief

Stamp duty relief in case ofreconstructions or amalgamations ofcompanies

Stamp duty relief is available where the transfer ofbusiness or shares is carried out in connection witha scheme of reconstruction or amalgamation ofcompanies, subject to meeting all conditions.

1. 3-year moratorium period

Presently, one of the pertinent conditions isthe 2-year moratorium period whereby:-

a) For transfer of business, where theconsideration shares (at least 90% in theissue of shares) are issued by thetransferee company to the existingcompany, the existing company must bethe beneficial owner of the considerationshares for at least 2 years.

b) For transfer of shares, the transfereecompany must be the beneficial owner ofshares in the existing company it acquiredfor at least 2 years.

It is proposed that the 2-year moratorium isextended to 3 years.

2. Where stamp duty relief has been obtained,each party to the instrument is required tonotify the Collector of any circumstances whichwould result in any of the conditions not beingfulfilled (e.g. untrue declaration furnished tothe Collector, failure to meet the 3-yearmoratorium) within 30 days from the date ofthe occurrence.

3. Any person who, without reasonable excuse,fails to give notice within the stipulated periodcommits an offence and shall, on conviction, beliable to a fine not exceeding RM10,000.

Stamp duty relief in case transfer ofproperty between associatedcompanies

1. The following new conditions are introduced:

(i) The transferee company cannot disposeof the asset that it has acquired within 3years from the date of the conveyance ortransfer of the asset.

(i) The transferor company and transfereecompany must be associated companies(i.e. 90% shareholding relationship) for aperiod of 3 years from the date of theconveyance or transfer.

2. It is proposed that where it is found that anydeclaration or other evidence furnished insupport of the claim is untrue, the exemptionfrom duty shall be revoked and stamp dutytogether with interest at the rate of 6% perannum shall be charged.

3. Where stamp duty relief has been obtained,each party to the instrument is required tonotify the Collector of any circumstanceswhich would result in any of the conditionsnot being fulfilled within 30 days from thedate of the occurrence.

4. Any person who, without reasonable excuse,fails to give notice within the stipulated periodcommits an offence and shall, on conviction,be liable to a fine not exceeding RM10,000.


Stamp duty administration

Requirement to keep records

A new requirement has been proposed where everyperson is required to keep the instrument and allrelevant documents for a period of 7 years from thedate the duty is paid.

Any person who, without reasonable excuse, failsto keep instruments and all relevant documentscommits an offence and shall, on conviction, beliable to a fine not exceeding RM10,000.

Loss of stamp certificate

A new section is introduced to deal with the loss ofstamp certificate.

Where, on the loss of a stamp certificate, anapplication is made to the Collector for theissuance of a substituted stamp certificate, theCollector shall not issue the substituted stampcertificate unless it can be shown to the satisfactionof the Collector that all facts and circumstancesaffecting the liability of the original instrument toduty has been fully and truly set forth, and theamount of the duty chargeable has been paid.

The application for the issuance of a substitutedstamp certificate shall be made within 6 years fromthe date of the execution of such instrument.

Each substituted stamp certificate is issued uponpayment of a fee of RM100.

Allowance for spoiled stamps

1. Presently, allowance would be made for spoiledstamps in the case where the stamp is used foran instrument executed, which by reason of theinability or refusal of any person to act underthe same, or for want of registration within thetime required by law, fails of the intendedpurpose or becomes void.

An amendment is made to provide “anyperson” does not include “the person liable topay the stamp duty”.

2. The existing provision also provides theallowance for spoiled stamp can be claimed inthe case of an instrument executed by anyparty implementing a sale under a dulystamped sale and purchase agreement butsubsequently became cancelled, annulled,rescinded or not performed.

An amendment is made to provide “anyperson” does not include the purchaser.

The above proposals will effectively result inthe allowance can only be claimed when thenon-performance of the agreement is by aparty other than the purchaser.


Offences and penalties

Increase in penalties

There is an overall increase in penalties in theAmendment Bill.

For example –

i. Increase in penalty for executing and signingdocuments not duly stamped from RM1,500to RM6,000.

ii. Increase in late stamping penalties forstamping of instruments after execution, asfollows–

It is also proposed where an instrument is notduly stamped in accordance with the FirstSchedule of the Stamp Act, the Collector mayimpose a penalty treble the amount ofdeficient duty.

iii. Increase in penalty for the offences relating tostamp certificates from RM5,000 toRM10,000.

Recovery of duties, penalties and othersums

The Government shall be empowered to recover allduties, penalties and other sums required to bepaid under the Stamp Act by civil proceedings.

In addition, in a suit under the Stamp Act, theproduction of a certificate signed by the Collectorgiving the name and address of the defendant andthe amount of the duty or penalty due from thedefendant, shall be sufficient authority for thecourt to give judgement for that amount.

Compoundable offences

It has been proposed a new section will beintroduced to empower the Minister of Finance tomake regulations to prescribe compoundableoffences. A new section is also introduced whichrequires the Collector to obtain written consent ofthe Public Prosecutor before an offence can becompounded.

Current Proposed

RM25 or 5% of theamount of deficientduty, whichever sum bethe greater, if theinstrument is stampedwithin 3 months afterthe time for stamping.

RM25 or the amount ofdeficient duty,whichever sum be thegreater, if the instrumentis stamped within 90days after the time forstamping.

RM50 or 10% of theamount of the deficientduty, whichever sum bethe greater, if theinstrument is stampedlater than 3 months butnot later than 6 monthsafter the time forstamping.

RM50 or 2 times of theamount of the deficientduty, whichever sum bethe greater, if theinstrument is stampedlater than 90 days butnot later than 180 daysafter the time forstamping.

RM100 or 20% of theamount of the deficientduty, whichever sum bethe greater, in any othercase.

RM100 or 4 times of theamount of the deficientduty, whichever sum bethe greater, in any othercase.


Savings and transitionalprovisions

Savings and transitional provisions

The Amendment Act shall not affect–

a) any instrument executed before the cominginto operation of the Amendment Act;

b) any instrument executed after the date ofcoming into operation of the Amendment Actimplementing a sale under a duly stampedagreement for sale and purchase executedbefore the date of coming into operation of theAmendment Act;

c) any liability on the payment of stamp dutiesprovided under any provision in any writtenlaw until such provision is repealed;

d) any exemption from payment of stamp dutiesprovided under any provision in any writtenlaw until such provision is repealed under theRevocation of Exemption From Payment ofStamp Duties Act 1992 [Act 478];

e) any liability incurred, duty, penalty or othersum required to be paid before the cominginto operation of the Amendment Act; and

f) any objection or appeal made by any personon assessment raised before the coming intooperation of the Amendment Act, and theobjection and appeal shall be dealt with underthe Stamp Act as if the Stamp Act had notbeen amended.

TaXavvy is a newsletter issued by PricewaterhouseCoopers Taxation Services Sdn Bhd. Whilst every care has been taken in compiling this newsletter, wemake no representations or warranty (expressed or implied) about the accuracy, suitability, reliability or completeness of the information for any purpose.PricewaterhouseCoopers Taxation Services Sdn Bhd, its employees and agents accept no liability, and disclaim all responsibility, for the consequences ofanyone acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. Recipients should not act upon itwithout seeking specific professional advice tailored to your circumstances, requirements or needs.

© 2016 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” and/or “PwC” refers to the individual members of thePricewaterhouseCoopers organisation in Malaysia, each of which is a separate and independent legal entity. Please see www.pwc.com/structure for furtherdetails.

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Let’s talk

Margaret LeeSenior Executive Director

Т: +60 3 2173 1501E: [email protected]

Our Stamp Duty specialists

Cynthia NgManaging Consultant


Koot Chiew KhuinExecutive Director


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