TABLE OF CONTENTS

1 INTRODUCTION..............................................................................................................3

2 OBJECTIVE......................................................................................................................5

3 METHODOLOGY.............................................................................................................6

4 TYPES OF STAMP DUTY...............................................................................................7

4.1 Ad Valorem Duty........................................................................................................7

4.2 Fixed Duty...................................................................................................................7

5 INSTRUMENT CHARGEABLE WITH DUTY...............................................................8

5.1 Method of computation of duty...................................................................................8

5.1.1 Stamp duty for charge or mortgage including that under the Syariah, bond,

covenant, debenture (not being a marketable security)........................................8

5.1.2 Stamp duty for conveyance, assignment, or transfer of property........................9

5.1.3 Stamp duty on loan agreements.........................................................................11

5.1.4 Stamp duty on service agreement instruments executed on or after 1 January

2011....................................................................................................................11

5.1.5 Stamp duty on construction contract instruments..............................................11

5.1.6 Agreement or memorandum of agreement........................................................12

5.1.7 Lease or agreement for lease of any immovable property and for securing the

payment for the provision of services or facilities or to other matters or things in

connection with such lease.................................................................................12

5.1.8 Sales and Purchase Agreement – S&P (Refer Appendix no.)...........................13

1

5.1.9 Insurance Policy (Refer Appendix no.)..............................................................13

5.1.10 Cheques (Refer Appendix no.)...........................................................................13

5.2 Exemption and remission of stamp duty...................................................................13

6 DUTY PAYABLE...........................................................................................................17

7 TIME OF STAMPING INSTRUMENTS.......................................................................19

8 ADJUDICATION OF INSTRUMENTS.........................................................................22

9 OFFENCES AND PENALTIES......................................................................................25

10 CONCLUSION................................................................................................................27

11 APPENDIX……………………………………………………………………………. 28

2

1 INTRODUCTION

Stamp duty is a tax levied on a variety of written instruments specifies in the First Schedule

of Stamp Duty Act 1949. In general, stamp duty imposed to legal, commercial and financial

instruments. The Assessment and collection of Stamp Duties is sanctioned by statutory law

now described as the Stamp Act 1949.

A stamp duty broadly refers to any tax a government entity levies on documents. Documents

used to require the application of a physical stamp to prove the stamp duty had been paid, but

in the present day, an actual stamp is typically no longer required as proof of payment.

Checks, land purchases and sales, marriage licenses, and military commissions have

historically been subjected to a stamp duty. The federal government used to assess a stamp

duty on assorted transactional documents, but today the stamp duty for these are imposed by

state governments. For instance, the deed to a house may be assessed a stamp duty before it is

transferred from seller to buyer. Mortgages and other property-related instruments of finance

may also be subject to a stamp duty, payable at the time of registration.

Franking or "franks" are any and all devices or markings such as postage stamps , printed or

stamped impressions, coding’s, labels, manuscript writings including "privilege" signatures,

and or any other authorized form of markings affixed or applied to mails to qualify them to

be postal serviced. In Inland Revenue Board (IRB) there will use franking machine to stamp

the value of stamp duty document. Previously, the colour of the stamp is red but effective on

November 2011 the colour of the stamp changes to green.

There are three methods of stamping. First the stamping can be done at the IRB’s counter;

where. They will be using the Franking Machine and Revenue Stamp. The second method is

using STAMPS which is an online service provider (http://stamps.hasil.gov.my). STAMPS is

an Electronic Stamp Duty Assessment and Payment System via internet. This method will

3

replace the manual system applied/conducted in IRB’s counter. Lastly, the third method is

called Kew. 38 receipt; the payment of duty for stamping through the issuance of Kew. 38

receipt.

Payment could be made at any IRB Stamp Duty Branch Offices and Revenue Service Centres

in the following manner by cash or Revenue Stamp. The use of revenue stamp is only

applicable if the duty does not exceed more than RM500. Besides that, the payment can also

be made by Money Order, Solicitor`s Cheque (client account) or Bank Draft, made payable

to the Collector of Stamp Duty and submitted together with the relevant instrument to the

stamp duty office by hand or through registered post. In addition, the payment of duty stamp

can also be made at the District Offices but restricted only to the following modes of

payment; payment using Revenue Stamp and the amount duty payable not exceeding RM500.

Lastly, there are two parts of the stamp duty, which are the transfer of ownership and the non-

transfer of ownership. The transfer of ownership is divided into 3 types, which are land

property under section 32(c), shares section 32 (b) and business section 32(a). As for the non-

transfer ownership, there are three types of instruments which are security, tenancy and

general.

4

2 OBJECTIVE

It is hoped that this project will help us to learn and understand more about the stamp duty,

for example in term of what is meant by the stamp duty and its purposes as well as on how to

calculate the ad valorem value.

Besides, it is also anticipated that this project will help us to first identify that there are indeed

differences between the calculation of the IRB and the law firm. To understand why does the

differences occur, and finally to make judgement on which calculation to be taken as the final

value.

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3 METHODOLOGY

Our research methodology requires the process of gathering relevant data from the specified

documents, interviews and books. We have interviewed three firms with different field which

is are the Inland Revenue Board (IRB), secretary firm and law firm. In IRB we have

interviewed Miss Azliza Mior Wahididdin who is Deputy Collector of Stamp Duty at Duty

Stamp Office. From the interview, we managed to get more information about the calculation

of the stamp duty, the method of stamping and the relevant documents that we need for this

project.

Besides that, we also did an interview with Mr Muhammad Asyraf Adha Raimi from

Flamingo Point Sdn. Bhd. who is a secretary for a company in Kuala Lumpur and Miss

Yasmin Dato Mohd Ariff, a lawyer from Noraishah Yasmin & Associates. From the

interview, we get the opportunity to learn on how to calculate the computation for the stamp

duty.

Furthermore, we also did refer to some books which are the Advanced Malaysian Taxation

Text Book and Stamp Duty Handbook. These two books help us to understand more about

stamp duty, types of stamp duty and many more.

In addition, we also refer to some specific documents such as budget 2013 and budget 2012,

document from MIA and Maybank.

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4 TYPES OF STAMP DUTY

The Stamp Duty Act 1949 has divided stamp duty into two; ad valorem duty and fixed duty.

4.1 Ad Valorem Duty

Ad Valorem Duty can be define as the duty imposed on the value of the transaction in the

instrument or the value of the relevant market. Ad Valorem Duty Imposition (according to

the value) on;

i. Instrument of transfer (by sale or gift) of property including marketable securities,

shares in other companies and intangible assets.

ii. Instrument creating the interest in the property.

iii. Instrument which guarantees a payment and repayment of money, including

instrument creating the contract for payment or liability for payment.

iv. Capital market instruments.

4.2 Fixed Duty

Fixed Duty is a duty imposed on a fixed sum with value of the transaction in the instrument.

i. Other legal instruments, business, trade or market capital, and

ii. A duplicate or a subsidiary or a collateral instrument when it can be shown that the

original or principal or primary instrument has been duly stamped.

AD VALOREM DUTY FIXED DUTY

Tenancy Agreement Agreement or Memorandum of Agreement (RM10)

Transfer of Property Policy of Insurance (RM10)

Transfer of Shares Cheque (15 cent)

Lease or Agreement for lease Counterpart or Duplicate (RM10)

Table 1: Type of stamp duty

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5 INSTRUMENT CHARGEABLE WITH DUTY

5.1 Method of computation of duty

This is the formula and calculation from Malaysian Institute of Accountant website, PKF

Worldwide Tax Guide 2012 and Stamp Duty Act 1949.

5.1.1 Stamp duty for charge or mortgage including that under the Syariah, bond,

covenant, debenture (not being a marketable security)

a) Loan for the purpose of small and medium enterprise approved by the Minister of

Finance

“Small and medium enterprise” is defined in Section 2 of the Stamp Act 1949 as

follows:

i. in relation to the manufacturing, manufacturing related services and agro-

based industries sectors, an enterprise with full-time employees not exceeding

150 people or annual turnover not exceeding RM25 million; and

ii. in relation to the services, primary agriculture and information and

communication technology sectors, an enterprise with full-time employees not

exceeding 50 people or annual turnover not exceeding RM5 million.

For an amount not exceeding RM250,000

of the aggregate loans or of the aggregate

financing under the Syariah in a calendar

year

RM0.50 for every RM1,000 or fractional

thereof

For each additional RM1,000 not

exceeding RM1,000,000

RM2.50 for every RM1,000 or fractional

thereof

For each additional RM1,000 or part

thereof

RM5.00

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b) Being the principal security (except in certain instances) in respect of:

Foreign currency loans or Syariah

financing in foreign currency

RM5 per RM1,000 or part thereof with total

duty payable not exceeding RM500

Any other case (other than loans for

small and medium enterprise)

RM5 per RM1,000 or part thereof

5.1.2 Stamp duty for conveyance, assignment, or transfer of property

a) Properties

On the first RM100,000 RM1.00 per RM100 or part thereof

On the next RM400,000 RM2.00 per RM100 or part thereof

In excess of RM500,000 RM3.00 per RM100 or part thereof

By referring to the Advanced Taxation, we carry out a calculation of the stamp duty to

determine what the transfer of property will be by market value or consideration paid.

Based on our finding from the interview session with IRB official, consideration paid

will be used on computation of stamp duty if the purchaser and buyer have sales and

purchase agreement. However, if they do not have sales and purchase agreement,

market value will be used for computation of stamp duty. Official of IRB claimed that

the sales and agreement is not compulsory for agreement as it is just a considered as

secured tools of agreement. It depends on the members of the agreement.

i. Example of instruments we have collected: Memorandum of Transfer less

than RM500,000- MOT (Refer Appendix no.7)

Sale and purchase agreement RM350,000

First RM100,000 = RM100,000/RM100 x RM1 = RM1,000

Next RM250,000 = RM250,000/RM100 x RM2 = RM5,000

TOTAL = RM6,000

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ii. Example of instruments we have collected: Memorandum of Transfer

more than RM500,000- MOT (Refer Appendix no.8)

First RM100,000 x 1%

RM100,001 to RM500,000 x 2%

RM500,000 and above x 3%

Purchase Price = RM 776, 542

First RM100,000 x 1% = RM1,000

Next RM400,000 x 2% = RM8,000

Next RM276,542 x 3% = RM8,296

TOTAL = RM17,296

b) Stock, shares or marketable securities

RM3 per RM1,000 or part thereof

i. Example of instruments we have collected: FORM 32A-Transfer of

securities (Refer Appendix no.9)

Consideration paid: RM25,000

RM25,000/RM1,000 x RM 3 = RM75

ii. Example of instruments we have collected: Notices of transfer securities

(Refer Appendix no.10)

Compare between Net Tangible Assets (NTA), Price Earnings Ratio (PER)

and sales consideration whichever is the highest.

From that appendixes, the highest amount is NTA amount of RM56,096.32.

Thus, the amount of NTA should be round off to RM57,000 according to law.

RM57,000/RM1,000 x RM3 = RM171

10

5.1.3 Stamp duty on loan agreements

All loan agreements (except education

loans)

Ad valorem of RM5 for every RM1,000 or

part thereof – effective from 1 January 2009

Education loan agreements - PTPTN Fixed at RM10

5.1.4 Stamp duty on service agreement instruments executed on or after 1 January

2011

All service agreements(one tier)

Ad valorem rate of 0.1%

Multi-tier service agreement:

(a) Non-government contract

(b) Government contract

First levelSubsequent level(s)

First levelSecond level

Subsequent level(s)

Ad valorem rate of 0.1% RM50.00

ExemptedAd valorem rate of 0.1%

RM50.00

5.1.5 Stamp duty on construction contract instruments

(a) Non-government contract First level

Subsequent level(s)

Ad valorem rate of 0.1%

RM50.00 and any stamp

duty paid in excess will be

remitted

(b) Government contract First level

Second level

Subsequent level(s)

Exempted Ad valorem rate

of 0.1% RM50.00 and any

stamp duty paid in excess

will be remitted

(c) Projects that are cancelled by

the parties who had offered the

contracts, and stamp duty for all

such contracts had been paid

– Only the stamp duty at the

ad valorem rate will be

refunded.

– Stamp duty at the fixed rate

of RM50.00 will not be

refunded.

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5.1.6 Agreement or memorandum of agreement

Up to 31 December 2000 RM3

From 1 January 2001 onward RM10

Agreement or memorandum of agreement mad under hand and not otherwise charged with

any duty

5.1.7 Lease or agreement for lease of any immovable property and for securing the

payment for the provision of services or facilities or to other matters or things in

connection with such lease

When the lease is for a period

Less than

1 year

1 year to

3 years

More than

3 years

Without fine or premium when the average

rent and other considerations calculated for

a whole year:

i) does not exceed RM2,400

ii) for every RM250 or part thereof

in excess of RM2,400

Nil

RM1

Nil

RM2

Nil

RM4

In consideration of a fine or premium and

without rent

The same duty as for a conveyance for a sum

equal to the amount of such consideration

In consideration of a fine or premium and

reserving a rent or other considerations

The same duty as for a conveyance on sale in

consideration of the fine or premium and a

lease for the rent

Example of instruments we have collected: Tenancy Agreement (Refer

Appendix no.11)

Monthly payment = RM1,700

First RM2,400 is exemption.

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Monthly payment x 12 months = 1,700 x 12 = RM20,400. Minus with first RM2,400

equal to RM18,000(RM20,400 – RM2,400). The amount should be for every RM250,

thus the amount will become RM18,250 and then, divided it by RM250. The

amount is equal to RM73 and times by RM2= RM RM146 @ RM150.

5.1.8 Sales and Purchase Agreement – S&P (Refer Appendix no.17)

Sales and purchase agreement is categorized under fixed duty. From our discussion with Pn.

Azliza (Official collector IRB Shah Alam), sales and purchase agreement will be charged RM

10 per copy of agreement.

5.1.9 Insurance Policy (Refer Appendix no.13)

Insurance policy is categorized under fixed duty. The amount stated on first schedule is

RM10 per policies.

5.1.10 Cheques (Refer Appendix no.14)

According to the first schedule, cheques will be charged 15 cent per transaction. From our

session with Mrs Latifah, the duty of cheque will be debited on customer accounts. If the

customer enquire for 100 pieces of cheques, the amount of RM15 (15 cent x 100 pieces) will

be debited in her company accounts.

5.2 Exemption and remission of stamp duty

Below are the general exemptions according to Section 35, Stamp Duty Act 1949

1. All instruments of any kind whatsoever, and all counterparts or duplicates of such

instruments, made or executed by or on behalf or in favour of a Ruler of a State or the

Government of Malaysia or of any State, where, but for this exemption, the Ruler or

13

the Government would be liable to pay the duty chargeable in respect of such

instrument.

The above exemption does not extend to any instrument or writing signed or executed

by any officer as Official Administrator (or, in the case of Sabah, as Administrator

General) or Public Trustee or by a receiver appointed by the Court; or to any

instrument rendered necessary by any written law or order of Court; or to a sale made

for the recovery of an arrear of revenue or in satisfaction of a decree or order of Court.

2. Any grant or lease made on behalf of the Government by virtue of the National Land

Code [Act 56 of 1965] or the National Land Code (Penang and Malacca Titles) Act

1963 [Act 518] or the Land Ordinance of Sabah [Sabah Cap.68] or the Land

Ordinance of Sarawak [Sarawak Cap.81].

3. Any instrument for the sale, transfer or other disposition, either absolutely or by way

of charge or otherwise, of any ship or vessel or any part, interest, share or property of

or in any ship or vessel registered or licensed under the Merchant Shipping Ordinance

1952 [Ord. 70 of 1952] or under any law for the time being in force in any part of

Malaysia.

4. Any instrument relating exclusively to immovable property situate out of Malaysia or

relating exclusively to things done or to be done out of Malaysia.

5. All instruments relating solely to the business of any society registered under any

written law relating to co-operative societies, and executed by an officer or member of

such society, the duty on which would, but for the exemption hereby granted, be

payable by such officer or member.

6. An instrument executed pursuant to a scheme of financing approved by the Central

Bank, the Labuan Financial Services Authority, the Malaysia Co-operative Societies

Commission or the Securities Commission as a scheme which is in accordance with

14

the principles of Syariah, where such instrument is an additional instrument strictly

required for the purpose of compliance with those principles but which will not be

required for any other schemes of financing.

We have compared the implementation on stamp duty to the budget speech by our prime

minister for years of 2012 and 2013 and the summary is as followed:

Current implementation and highlighted budget of 2012

Proposed budget for 2013

100% stamped duty exemption will be given on loan agreements for the purchase of residential properties under the PR1MA Scheme priced up to RM300,000.(EFFECTIVE DATE: 1/1/12 ~ 31/12/16)100% stamped duty exemption will be given on loan agreements up to RM50,000 undertaken from the Professional Services Fund. Loans executed between any professionals with Bank Simpanan Nasional.(EXECUTED FROM 1/1/12)

Stamp duty exemption on instruments relating to the transaction of retail bonds/sukuk for individual investorsThe transfer of any business, asset and real property to business trust will be given stamp duty exemption.

50% stamped duty exemption on the instrument of transfer agreement and loans agreements for the purchase of first residential property. Price is not more than RM350,000.(EFFECTIVE DATE: 1/1/11 ~ 31/12/12)

50% stamped duty exemption on the instrument of transfer agreement and loans agreements for the purchase of first residential property. Price is not more than RM400,000.(EFFECTIVE DATE: 1/1/13 ~ 31/12/14)Revival of abondened Housing Projects

- Stamp duty exemption on all instruments executed for the purpose of transfer of land or houses and loan agreements to finance the cost of revival.(S&P EXECUTED FROM 1/1/13 ~

15

31/12/15)- Original buyer will be given stamp

duty exemption on all instruments executed for the purpose of obtaining additional finance and the transfer of the house.(S&P EXECUTED FROM 1/1/13 ~ 31/12/15)

Full exemption from stamp duty on all loan agreements and services agreements executed by Treasury Management Centre (TMC) in Malaysia for qualifying TMC activities.Stamp duty exemption on loan and service agreements for Kuala Lumpur International Financial District (KLIFD).100% stamp duty exemption be given on loan agreements up to RM50,000 under Micro Financing Scheme. Loans executed between micro enterprises and SMEs with any banking and financial institution.Stamp duty exemption extended to instrument executed pursuant to a scheme of financing in accordance with the principles of Syariah approved by MCSC.

100% waiver for 10 years and exemption of stamp duty for private entrepreneurs in the oil and gas industry

Table 2: Comparison budget of stamp duty

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6 DUTY PAYABLE

Stamp Act 1949 is just a voluntary act. Which means, if you volunteer to submit your

instrument to IRB for evaluation, IRB will do for you and you will be imposed on some of

value. However, if you refuse to do so, no action would be taken against you. In other words,

DG of IRB does not have any power to imposed fine or prison you.

The privilege of stamping the instruments is it can be held as a valid evidence of the

transaction that you have undergone with the other parties for the court.

According to Stamp Duty Act 1949;

“33. The expense of providing the proper stamp duty be borne—

(a) In the case of the instruments described in the first column of the Third Schedule,

by the person mentioned in the second column of such Schedule;

(b) In the case of every other instrument, by the person drawing, making or executing

such instrument.

It means that the stamp duty is generally payable by the party who agreed to pay the duty.

Section (a) and (b) are only applicable in cases where the parties to an instruments have not

agreed as to which party should bear the duty. The third schedule of Stamp Duty Act 1949

has listed the persons liable to pay duty as followed.

17

Item Nature of instrument and the item number thereto in

first schedule duty

Person liable to pay

1 AGREEMENT OR MEMORANDUM OF

AGREEMENT —No. 4

The person by whom the

instrument is first executed

2 BOND — No. 21, 22, 23 and 25 The obligor or other person

giving the security

3 CHARGE OR MORTGAGE — No. 27 The chargor, mortgagor or

obligor

4 CONTRACT —No. 30 The person by whom the

instrument is first executed

5 CONTRACT NOTE —No. 31 The person on whose account

the purchase or sale is made

6 CONVEYANCE —No. 32 The grantee or transferee

7 Exchange —No. 43 The parties in equal shares

8 LEASE OR AGREEMENT FOR LEASE —No. 49:

(a) Lease or agreement

(b) Counterpart

The lessee

The lessor

9 RE-CONVEYANCE —No. 65 The transferee or assignee or

the person redeeming the

security

Table 3: Third schedule SDA 1949-Duty by whom payable

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7 TIME OF STAMPING INSTRUMENTS

The general principle is that all instruments executed in Malaysia should be stamped before

or at the time of execution under Section 41 Stamp Act 1949. Instruments that executed out

of Malaysia must be stamped within 30 days after being first received in Malaysia excluding

cheques or promissory notes under Section 42 Stamp Act 1949. Verification of the date of

receipt in Malaysia may be done by production of the envelope in which the instrument was

received or any accompanying letter or by statutory declaration unless the date of instrument

shows that it must have been received within 30 days.

Cheques or notes drawn out of Malaysia and brought into Malaysia before being stamped

must be duly stamped before presentation for acceptance or payment or are endorsed,

transferred or otherwise negotiated under Section 43(1) and 43(2) Stamp Act 1949. If the said

instruments bear the stamps but are not cancelled, the holder can cancel the stamps and the

instruments are considered duly stamped under Section 43(3) Stamp Act 1949. Penalties

would still be levied for not affixing or cancelling stamps in respect of the said instruments

under Section 43(4) Stamp Act 1949.

It is explained that instruments which have not been stamped as described can be stamped

after the presentation for acceptance or payment or endorsed, transferred or otherwise

negotiated in Malaysia within 30 days after first received in Malaysia with payment of a

penalty of RM10 or of the amount of the deficient duty; whichever penalty is greater, or after

the expiration of 30 days of receipt in Malaysia with payment of a penalty of RM25 or four

times the amount of deficient duty whichever is greater.

Cheques accepted or payable outside Malaysia are not to be held invalid by reason of not

being stamped and any such document which is not stamped or insufficiently stamped may be

19

received in evidence on payment of duty and penalty payable under Section 47A. Such

cheques are deemed to be instruments which can be stamped after the first execution under

Section 44 Stamp Act 1949.

Where a cheque payable is presented for payment and is not stamped, the payee can upon

fixing the proper adhesive stamps and cancelling the same pay the amount due less the cost of

the stamps under Section 45(1). Such instruments are considered good and valid. However,

this does not absolve the penalties if any due under Section 45(2) Stamp Act 1949.

Transfer of shares which are numbered shall not be stamped until the numbers of the shares

are entered. In general, instruments unstamped or insufficiently stamped excluding a cheque

or promissory note drawn or made within Malaysia, can be stamped after execution after

payment of unpaid duty within 30 days of its execution if executed in Malaysia or if executed

outside Malaysia within 30 days of receipt in Malaysia under Section 47 and 47A Stamp Act

1949.

Where an instrument was sent for adjudication and the Collector has determined the duty, the

instrument must be stamped within 14 days after notice of assessment by the Collector. In

case where an application was made to the High Court under Section 39, the instrument must

be stamped within 14 days after the issue of the order of the court. In both cases the

instrument may be stamped within further period as specified by the Collector or the court.

The 14 days or the further specified period may upon an application made before the said

periods expire be further extended by the Collector or the court under the provision of

Section 40 Stamp Act 1949.

Instruments not stamped within the period or periods specified in Section 40 or Section 47

can be stamped on payment of unpaid duty and a penalty of RM25 or 5% of the deficient

study whichever is greater if the instrument is stamped within 3 months after the time for

20

stamping or RM50 or 10% of the deficient duty, whichever grater if instrument is stamped

later than 3 months but not later than 6 months after the time for stamping or RM100 or 20%

of the deficient duty whichever is greater in any other case. The Collector may reduce or

remit any such penalty or further amount payable under Section 9(1) (c) Stamp Act 1949.

In respect of late stamping of a cheque or promissory note, the penalty shall be as follows:

i. The higher of RM25 or 5% of the amount of deficient duty if it is stamped within 3

months after the time for stamping.

ii. The higher of RM50 or 10% of the amount of deficient duty if it is stamped later than

3 months but not later than 6 months after the time for stamping.

iii. The higher of RM100 or 20% of the amount of deficient duty in any other case.

All penalty under Section 43 or 47 A Stamp Act 1949 will be denoted on the instrument by a

stamp duly cancelled or by means of an impressed stamp or in case of Sabah and Sarawak by

affixing an official receipt to the instrument and certified by the Collector. Penalties are

payable by whom the stamp duty is payable. Penalties payable are debts due to the

government and are recoverable by civil suit under Section 50.

The Minister of Finance has power to exempt from duty any class of instruments of

instruments in favour of any particular class of persons or in favour of any member of that

class. The Minister of Finance may exempt from duty any instrument in relation to any

scheme and also reduce or remit any duty in relation to any scheme. The Minister of Finance

also can reduce or remit duties in respect of any class of instruments or any class of persons.

Payment of penalty under Section 43 or 47A is to be denoted on the instrument by a stamp

duly cancelled, means of an impressed stamp, affixing an official receipt to the instrument

and attaching a stamp certificate to the instrument.

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8 ADJUDICATION OF INSTRUMENTS

Adjudication is the process whereby a document either stamped or unstamped is presented to

the Collector for his opinion as to the stamp duty chargeable on that instrument. As an

indicated earlier an instrument not duly stamped is inadmissible in evidence in civil cases and

it follows those parties to a contract or conveyance to be certain that their document is duly

stamped would rather have the document adjudicated by the Collector of Stamps. Once the

Collector has adjudicated the duty payable, the Collector cannot revise his assessment.

There is no fee payable for adjudication of a document under Section 36(1). But there is a fee

of RM10 under Section 36 A(3)(a). The instrument to be adjudicated should generally be

given to the Collector together with an affidavit or otherwise as required by the Collector.

Where the details required by the Collector are not furnished, the Collector may not proceed

with the process of adjudication unless the requirement of facts and details are complied with.

Material provided or supplied in pursuance of the process of adjudication cannot be used

against any person in a civil proceeding. Section 36(4) Stamp Act 1949 seems to suggest

where penalty has arisen due to facts not truly given, such penalty is relieved once full stamp

duty has been paid. But this conflicts with Section 37(4) which says that penalty incurred has

to be paid.

Where an instrument has been adjudicated by the Collector and if the stamps are sufficient

(document fully stamped) or duty as assessed is paid, the document would be indorsed by the

Collector denoting that the duty has been paid including where initial duty was paid under

Section 31A Stamp Act 1949 and where the document is not chargeable to duty. The

Collector would certify or indorse that the instrument is not chargeable with duty.

22

Where an instrument has been indorsed that instrument is deemed duly stamped or not

chargeable with duty and can be received in evidence. Under Section 37(5) Stamp Act 1949,

endorsement by the Collector is only applicable to instruments where endorsement is required

is pursuant to any written law.

The Collector cannot be compelled to certify the instrument if the document cannot be

stamped in law. There are certain document needs not to adjudicate which is a security for

money or stock without limit.

Example:

Mr Khairi is a businessman, he grants a charge over property in favour of a bank to secure

outstanding amounts on an overdraft facility. The charge is for an unknown sum which has

no maximum limit. Such a security document will have to be subject to additional stamp duty

as and when the overdraft increases and hence such a document is not suitable for

adjudication purposes.

Effective 1 January 2009, a “Stamp Certificate” will be issued by the stamp office upon

payment under the new electronic medium, to be attached to an instrument to denote duty

paid by electronic medium [Refer to Appendix no]. The tax authorities have indicated that

this is restricted for the time being to the stamping for transfers of property only. Prior

registration with the stamp office to pay under the electronic medium is required. Any person

who misuses the stamp certificate shall be guilty of an offence and shall be liable on

conviction to a fine not exceeding RM 5,000. Any banker, dealer, insurer and Kuala Lumpur

Stock Exchange(KLSE) has power to compound for payment of stamp duty on unstamped

cheques, unstamped contract notes, unstamped policies of insurance and rights subscription

forms.

23

If any person is dissatisfied with an assessment of the Collector, an objection can be taken by

a written notice and an application made to the Collector to review back the assessment. The

notice of objection must be made within 30 days after the date of the assessment or such

further period as the Collector may allow in any particular case. But, the notice of objection

must state the grounds of objection. Actually a notice of objection does not relieve the person

of liability to pay the duty.

An advantage of this procedure offers is that an instrument so stamped stands as conclusive

against third parties that it is duly stamped. Stamp duty imposition is unlike income tax where

if an assessor of the IRB makes a mistake he can rectify it by issuing an additional

assessment. But when an instrument is sent for adjudication as to stamps, the duty determined

upon adjudication is final and the Collector of Stamp Duties cannot years later claim he made

a mistake.

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9 OFFENCES AND PENALTIES

Under offences and penalties, we had covered certain penalties for offences under Malaysian

Stamp Act 1949. Most of the penalties are small sums.

AMOUNT SECTION

Not cancelling adhesive stamps < RM500 Sec. 60

Not setting forth all the facts and

circumstances

< RM2 500 Sec. 61

Execute and sign documents not duly stamped < RM1 500 Sec. 63

Failure to execute and transmit contract note < RM1 500 Sec. 64

Post dating bills < RM2 500 Sec. 65

Not making out policy other than on sea

insurance or making one not duly stamped

< RM1 000 Sec. 67

Assuring sea insurance unless under policy

duly stamped

< RM1 000 Sec. 68

Issuing share warrant not duly stamped < RM1 500 Sec. 69

Unauthorised dealing in stamps < RM1 000 Sec. 71

Hawking stamps < RM1 000 Sec. 72

Fraud in relation to duty < RM5 000 Sec. 74

There are several circumstances when persons will be fined for executing and signing

documents not duly stamped. The person with intent to evade the payment of duty, draws,

makes, executes or signs any instrument that chargeable with duty without the same being

duly stamped. Besides, any persons have drawn made, executed or signed any instrument that

chargeable without the same being duly stamped fails and without lawful excuse to produce

the due stamping. Apart from that, any persons that issue, endorse, transfer or present for

acceptance or payment or accepting, paying or receiving payment in any manner negotiating

a cheque or promissory note without the same being duly stamped.

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A broker or agent dealing or holding himself out as dealing as a principal in stock or

marketable security must execute a contract note and transmit the note to his principal or to

the vendor or purchaser of stock as the case may be. Failure to do so entails a fine not

exceeding RM1,500.

Besides, any person that intent to evade duty who issue any promissory note bearing a date

subsequent to that on which the note is actually drawn or knowing the note is post-dated

endorses, transfers or presents it for acceptance is liable to a fine not exceeding RM2,500.

In addition, any person who receives, takes credit for any premium for any insurance other

than a sea insurance and does not within a month of such receipt make out and execute a duly

stamped policy of insurance or makes, executes or delivers out or pays or allows in account,

any money upon or in respect of any policy other than a policy of sea insurance which is not

duly stamped is liable to a fine not exceeding RM1,000.

Furthermore, any person who become an assurer in respect of a sea insurance or renders

himself liable to pay monies in relation to a sea insurance and fails to do so under policy of

sea insurance duly stamped will be fined not exceeding RM1,000. Other than that, any person

who renders himself liable to pay any premium or consideration for any sea insurance and

fails to express the insurance in a policy of sea insurance duly stamped and also any person

involved in a fraud on policies of sea insurance.

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10 CONCLUSION

Based on our finding from the Collector department in IRB, we discovered that certain

information in Stamp Duty Act 1949 is not relevant due to the fact that the action of the

practitioner is not in line with the requirement stated in the current act. For instance, in Stamp

Act excerpt the evaluation by private sector and government sector have leads to excess

payment penalties. But, from the official of IRB information, she informed us they are just

using the government evaluation of instrument and private evaluation is not valid in IRB.

Therefore, we think that there is a need for the Regulator to revise the Stamp Duty Act 1949

according to the real world practice.

IRB have introduced new assessment system via online to collect stamp duty levied known as

STAMPS, Electronic Stamp Duty Assessment and Payment System. As STAMPS assists the

tax payers and expedite the process of stamp duty, it is believed to be a much better way of

making stamp duty than the conventional method.

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APPENDIX

NO.

DESCRIPTION INSTRUMENT GOT FROM

1 Letter for investigation School of Accountancy

2 Booklet of stamp duty and company card

of interviewee

3 Manual usage of STAMPS IRB website

4 PDS 1 form IRB website

5 Notice from IRB to make payment Flamingo Point SB

6 Certificate of stamp Flamingo Point SB

7 Notice of stamp duty payable

(Memorandum of Transfer)

Members

8 Notice of stamp duty payable

(Memorandum of Transfer)

Noraishah Yasmin & Associates

9 Form 32A (Allotment of shares) Aron-N Engineering SB

10 Notice of allotment of share Flamingo Point SB

11 Tenancy Agreement Members

12 Sales and Purchase Agreement Members

13 Insurance policy Members

14 Cheque Aron-N engineering SB

15 Duplicate Instrument Members

16 Education Agreement Members

17 Hire Purchase Agreement Aron-N Engineering SB

28

29

APPENDIX