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Stamp duty remission on service agreements
Following the Budget 2019 announcement, Item 22(1) of the First Schedule of the Stamp Act 1949 (SA) was amended via the Finance Act 2018, to clarify the stamp duty treatment for securities for a definite period and securities for a term of life or indefinite period, as follows:
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Description of instrument |
Stamp duty rate |
|---|---|
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BOND, COVENANT, LOAN, SERVICES, EQUIPMENT LEASE AGREEMENT OR INSTRUMENT of any kind whatsoever: |
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Being the only or principal or primary security for any annuity (except upon the original creation thereof by way of sale or security, and except a superannuation annuity), or for any sum or sums of money at stated periods, not being interest for any sum secured by a duly stamped instrument, nor rent reserved by a lease or tack – |
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(a) For a definite and certain period so that the total amount to be ultimately payable can be ascertained |
The same ad valorem duty as a charge or mortgage for such total amount |
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(b) For the term of life or any other indefinite period – For every RM100 and also for any fractional part of RM100 of the annuity or sum periodically payable |
RM1.00 |
The stamp duty treatment also applies to securities in relation to instruments of service agreements.
Following the above, the Stamp Duty (Remission) Order 2021 [P.U.(A) 428] was gazetted on 25 November 2021 and is deemed to have come into operation on 28 December 2018.
The Order provides that instruments of service agreementsNote that are chargeable under Item 22(1)(a), First Schedule of the SA will be subject to stamp duty at a rate of 0.1% (i.e., the stamp duty chargeable in excess of 0.1% is remitted).
Note:
The instrument of service agreement is to be executed by:
(a) A main service provider with a person other than a Ruler of a State or the Government of Malaysia or of any State or local authority awarding the undertaking
(b) A sub-provider of service with the main service provider, where the main service provider has entered into an undertaking with a Ruler of a State or the Government of Malaysia or of any State or local authority awarding the undertaking
Notwithstanding the above, where the parties mentioned in Points (a) and (b) above subsequently execute an instrument of service agreement with another sub-provider of service and so on, the amount of stamp duty that is chargeable on that subsequent instrument under Item 22(1)(a), First Schedule of the SA is capped at RM50 (i.e., the stamp duty chargeable in excess of RM50 is remitted). In this case, the agreement should state:
(i) The names of the parties
(ii) The execution date of the agreement referred to in Points (a) and/or (b) above
(iii) The subject matter of the agreement
(iv) That the agreement referred to in Points (a) and/or (b) above has been duly stamped at the rate specified under Paragraph (2)(1) of the Stamp Duty (Remission) Order 2021
With this, the Stamp Duty (Remission) (No. 4) Order 2010 [P.U. (A) 476] is revoked.