- Instruments implementing a transfer of company shares are chargeable to ad valorem duty at the rate of 0.3%, i.e. RM3 per RM1,000 or part thereof, on the higher of the consideration or market value of the shares [item 32(b) of the First Schedule, Stamp Act 1949].
C. Relief from stamp duty under section 15, Stamp Act 1949
This relief from stamp duty is afforded for the transfer of an undertaking or shares in a scheme of reconstruction or amalgamation of companies. Note that the companies concerned need not be related. The compulsory feature is the transfer must be pursuant to a scheme of reconstruction or amalgamation of companies.
Conditions
Section 15 stipulates the following requirements for the exemption to be applicable:
- The transferee company (e.g. AA) acquires
- the business undertaking; or
- at least 90% of the issued share capital
of an existing/target company (e.g. BB).
- AA pays for the acquisition (whether an undertaking or shares in BB) by issuing its own shares to BB or BB’s shareholders. The consideration shares of AA must constitute at least 90% of the total consideration for the acquisition.
- If AA acquires the business undertaking of BB, AA’s consideration shares may be paid to BB or BB’s shareholders. If AA acquires shares in BB, AA’s consideration shares will be paid to BB’s shareholders.
- The transferee company, AA, must be either a new company registered for this purpose, or a company which has increased its share capital to specifically facilitate this particular acquisition.
- There is a three-year embargo on the divestment of the shares so acquired, i.e.
- BB must not cease to own AA’s consideration shares, and
- AA must not cease to own BB’s shares
within three years of the date of registration or incorporation of AA, or within three years from the authority for the increase of share capital.
(Note that the shareholders of BB are not subject to the embargo in respect of their shares in AA received as consideration.)
However, the three-year embargo does not apply if ceasing to own the shares is in consequence of:
- reconstruction, amalgamation, liquidation or in compliance with Government policy on capital participation in industry in the case of BB’s holding of the AA consideration shares; or
- reconstruction, amalgamation or liquidation in the case of AA’s holding of BB’s shares.
Withdrawal of exemption
If the exemption under section 15 has been granted, but it is subsequently found that
- any material particular, declaration supporting evidence was untrue; or
- the three-year embargo has been breached;
each of the parties involved, i.e. AA and BB, must notify the Collector of Stamp Duty of the circumstances within 30 days from the date of the occurrence.
The exemption shall then be deemed not to have been allowed.
The consequences are:
- The stamp duty so remitted shall become payable and recoverable as a debt to the Government; and
- Interest will be charged at the rate of 6% per annum from the date the stamp duty would have become chargeable if the section 15 relief had not been granted.
In conclusion, section 15 does not apply in the following cases:
- Where there is no scheme of reconstruction or amalgamation of companies; or
- The consideration is in cash, not in own shares; or
- Where the transferee company (or where the share capital of an existing company has been increased) already owns more than 10% of the shares in the existing/target company before the reconstruction/amalgamation.
D. Relief from stamp duty under section 15A, Stamp Act 1949
Where there is a transfer of assets in the form of real properties or shares between associated companies, exemption from stamp duty is also available under section 15A.
Associated companies
A company (X) is associated with another company (Y) if:
(i) X owns at least 90% of the issued capital of Y, or vice versa; or
(ii) a third company owns at least 90% of the issued share capital of X and Y.
`Ownership' in the above context means 'ownership either directly or through another company or other companies; or ownership partly directly or partly through another company or other companies’. [Note: Schedule 6 of the Stamp Act specifically provides for direct and indirect holdings in determining the percentage of ownership in a company.]
Conditions
The transfer of assets occurs:
- Between associated companies, as defined;
- Consideration may be in cash or other forms;
- To achieve greater efficiency in operation; and
- The transferee company is incorporated in Malaysia.
The exemption under section 15A is not available if:
(i) the consideration will be wholly or partly provided or received, directly or indirectly, by a third party who is not a company associated with either the transferor or the transferee; or
(ii) the property or shares had been previously transferred by such third party; or
(iii) the transferor or transferee were to cease to be associated by reason of a change in the percentage of the issued share capital of the transferee in the beneficial ownership of the transferor or the third company, within three years of the date of conveyance or transfer of the assets; or
(iv) The transferee company disposes of the real property or shares it acquired within three years from the date of conveyance or transfer of the assets.
Withdrawal of exemption
If the exemption under section 15A has been granted, but it is subsequently found that:
- any material particular, declaration, or supporting evidence was untrue;
- the transferee and transferor ceased to be associated within three years; or
- the subject property or shares had been disposed of within three years;
each of the companies involved, shall notify the Collector of Stamp Duty of the circumstances within 30 days from the date of the occurrence.
The exemption shall then be revoked.
The consequences are:
- The stamp duty shall be chargeable and payable; and
- Interest will be charged at the rate of 6% per annum from the date the duty ought to have been stamped in respect of the conveyance or transfer.
Summary