This article serves as reference material for candidates preparing for the ATX-MYS, Advanced Taxation – Malaysia variant exam from the December 2023 session onwards. The laws referred to are those in force at 31 March 2023.
The content of this article is based on current legislation relating to stamp duty, with coverage restricted to syllabus item A6. Stamp duty as follows:
A6. Stamp duty a) The scope of stamp duty: |
Instrument
Stamp duty is a duty on instruments, not transactions.
'Instrument' includes every written document. In a transaction, there must be an instrument of transfer for stamp duty to arise. Therefore, if there is no instrument involved in a transfer, there is no stamp duty.
Value on which stamp duty is leviable
Stamp duty is levied on the greater of:
(a) the money value, if any, mentioned in the instrument of transfer or the consideration for the transfer; or
(b) the market value, as on the date of execution, of the property or company shares transferred.
Who pays?
In the case of real properties and company shares, the transferee (i.e. the acquirer) is the person responsible for paying the stamp duty [section 33 and the Third Schedule of the Stamp Act 1949].
Stamp duty is levied either at the relevant ad valorem rate or at a fixed rate.
Transfer of real properties and company shares (not quoted), being effected through instruments of conveyance or transfer, are duly subject to stamp duty at ad valorem rates as follows:
Value | RM'000 | Rate | |
---|---|---|---|
On the first | 100 | 1% | i.e. RM1 per RM100 or part thereof |
On the next | 400 | 2% | i.e. RM2 per RM100 or part thereof |
On the next | 500 | 3% | i.e. RM3 per RM100 or part thereof |
In excess of | 1,000 | 4% | i.e. RM4 per RM100 or part thereof |
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:
Withdrawal of exemption
If the exemption under section 15 has been granted, but it is subsequently found that
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:
In conclusion, section 15 does not apply in the following cases:
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:
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:
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:
Summary
|
Exemption under s.15 | Exemption under s.15A |
Circumstance | Scheme of reconstruction or amalgamation | Inter-company transfer to achieve greater efficiency in operation |
Transaction parties | Any two companies | Associated companies: 90% owned |
What is transferred | Undertaking (or part of an undertaking) or at least 90% of the shares of an existing company | Property or shares |
Form of consideration | Transferee must pay 90% of consideration with its own shares | No stipulation - may be in cash |
Embargo on disposal of subject shares or property | No disposal of consideration shares or acquisition shares by transferee company or existing company within three years from date of registration or authority to increase share capital for the acquisition | Transferee company shall not dispose of the real property or shares acquired within three years from the date of conveyance or transfer |
Notification by participant companies if conditions breached | All companies involved must inform the Collector within 30 days of the occurrence. | |
Withdrawal of exemption: consequences | Must pay the requisite duty and 6% interest per annum from the date of registration or increased capital of the transferee company | Must pay the requisite duty and 6% interest per annum from date of conveyance or transfer of property or shares |