Guide to Understanding Stamp Duty in Malaysia

Published: 16 May 2025

When signing an agreement/contract with other parties, being aware of stamp duty is essential, as it may significantly impact your overall expenses. Understanding the applicable stamp duty when entering an agreement/contract enables you to anticipate the fees involved.

This guide will assist you in effectively managing your costs, ensuring that you are not caught off guard during the agreement dealing process. Familiarizing yourself with stamp duty allows you to make informed decisions and enhance your business planning.

What is Stamp Duty in Malaysia?

Stamp duty is a tax imposed on instruments and not a transaction. An instrument is defined as any written document where the terms of a transaction are laid out. In general, stamp duty is levied on legal, commercial, and financial instruments.

For example, stamp duty for the acquisition of property refers to tax pay on legal instruments when buying, selling, or transferring properties in Malaysia. An unstamped instrument is not admissible as evidence in court and will not have its title registered/transferred. Therefore, it is part of the legal requirement that makes sure ownership is secure and crucial for a legal process.

Understanding Stamp Duty Rate and its Calculation

Understanding the stamp duty rate and how to calculate stamp duty in Malaysia are key for anyone who enters into any legal, commercial, or financial agreement. Instruments liable to stamp duty are those listed in the First Schedule of the Stamp Act 1949 (“SA”). Knowing these can help you to manage the cost of entering an agreement with other parties.

Stamp duty rates vary according to the nature of the instruments and transacted amounts. Several examples are demonstrated below for reference.

1.    Transfer of Property

Stamp duty increases as the property's value rises, with higher stamp duty payments required for more expensive properties. Please see the rate of ad valorem duty below:

Property Value	Rate
First RM100,000	1%
Amount over RM100,000 but not exceeding RM500,000	2%
Amount over RM500,000 but not exceeding RM1,000,000	3%
Amount over RM1,000,000	4%

Note: The above rates are only applicable to buyers other than foreign companies, non-citizens, and non-permanent residents.

Example:
Property Selling Price/ Market Value whichever is higher: RM1,500,000

Property Value (RM)	Rate	Stamp Duty (RM)
100,000	1%	1,000
400,000	2%	8,000
500,000	3%	15,000
500,000	4%	20,000
Total 1,500,000		44,000

2.    Loan agreement relates to the acquisition of property

In general, Malaysia loan agreements attract stamp duty at 0.5% on the loan amount (i.e. Loan Sum x 0.5%). For example, a loan agreement with a loan amounting to RM1,500,000 attracts RM7,500 stamp duty.

3.    Transfer of Business

Stamp duty related to business transfer is much more complicated. In general, the business transfer exercise may involve the sale of plants and equipment, trade debtors, inventories, etc., and the consideration stipulated in the business transfer agreement is dutiable at ad valorem rate. However, the transfer of goods held for sale in the ordinary course of business is exempted from ad valorem duty and therefore, the transferor is required to exclude the price of the goods from the consideration.

Stamp Duty Calculators: A Useful Tool

Online stamp duty calculators simplify the process of estimating stamp duty. By entering the property's value and type, you can quickly receive an estimate. These tools assist in better budgeting, helping to avoid unexpected costs when purchasing a property.

Exemptions and Reductions for Stamp Duty

Understanding stamp duty exemptions and reductions can be highly beneficial when entering into a legal, commercial, or financial agreement. There are special exemptions for certain groups. For example, reductions applied to transfers of immovable property between family members, can ease tax implications during property inheritance or gifting scenarios.

Deadline for stamping and stamp duty payment

Familiarising yourself with the stamp duty payment process is essential for managing property transactions efficiently. Understanding the required steps and timelines helps prevent delays and ensures compliance with legal requirements. The instrument such as Sale and Purchase Agreement (SPA) for property transfer must be stamped within 30 days from the date of SPA. A penalty will be imposed for the late stamping.

For property, transfer, the steps to pay stamp duty in Malaysia are listed below:

1. Figure out how much stamp duty you owe based on the property's price or value;
2. Register as a user for the Stamp Assessment and Payment System (STAMPS);
3. Complete the necessary stamp duty declaration information in the STAMPS;
4. Upload the requisite documents, such as the SPA into the STAMPS.
5. Pay the stamp duty amount based on the assessment raised by the Inland Revenue Board of Malaysia (IRBM) through online FPX payment;
6. Obtain a stamp certificate for your records.

Latest development of stamp duty

A.   Transition to a Self-Assessment System

Effective 1 January 2026, Malaysia will transition to a self-assessment system for stamp duty. Under this system:

• Taxpayers are responsible for ensuring proper stamping of instruments.
• Filing returns with instruments constitutes a deemed assessment by the Collector of Stamp Duties.
• Duty must be paid on the assessment date.
• The Collector can raise additional assessments within five years, with no time limit in cases of fraud or negligence.
• Non-compliance, including incorrect returns, may result in penalties.

B.   Stamp Duty Audit Framework

With self-assessment, audits become a key compliance tool. The IRBM introduced a Stamp Duty Audit Framework on 1 January 2025, detailing audit processes and taxpayer obligations.

Key aspects include:

1. Types of Audits:
   • General Review: Desk audits based on STAMPS system submissions, with potential interviews for clarification.
   • Comprehensive Review: In-depth audits at taxpayer premises or IRBM offices requiring detailed recordkeeping.
2. Audit Scope and Period: Up to three years, unless fraud, negligence, or evasion is involved.
3. Audit Case Selection Criteria: Risk assessment, industry concerns, specific taxpayer issues, and third-party data.
4. Voluntary Disclosure Mechanism: The penalty rate under Section 47A of the Stamp Act 1949 for voluntary disclosure cases is 10% or RM50, whichever is higher.

C.   Risk Management and Compliance

1. Reviewing Past Transactions:
   • Conduct internal audits of historical agreements.
   • Voluntarily disclose past non-compliance to mitigate risks.
   • Maintain thorough documentation to defend against reassessments.
   • Consult tax and legal advisors for risk assessment and corrective actions.
2. Addressing Common Misconceptions:
   • “Stamping is only required for court presentation.” – Incorrect, any instrument in the 1st Schedule of the Stamp Act 1949 (SA 1949) is chargeable.
   • “Intercompany documents do not require stamping.” – Incorrect, no automatic exemption applies.
3. Best Practices for Compliance:
   • Adopt a proactive stamping strategy.
   • Ensure proper classification of instruments to avoid underpayment and penalties.
   • Seek legal and tax advisory support.
   • Stay updated on legal precedents affecting stamp duty.

The transition to a self-assessment system and the introduction of an audit framework underscore the importance of compliance, proactive risk management, and staying informed of legislative changes.

Conclusion

Understanding stamp duty in Malaysia is key for anyone when entering a legal, commercial, or financial agreement. This article has covered its definition, stamp duty rates, and suggested steps to stamp the instruments. Using stamp duty calculators helps with better financial planning.

On the other hand, you can rely on the best tax advisory firm in Malaysia for reliable stamp duty knowledge in Malaysia. For instance, we will provide knowledge about exemptions and reductions that can save your money significantly. Being informed about these rules helps you deal with stamp duty well. Moreover, there is also important notice to meet tax deadlines and follow procedures to avoid extra costs.

As you continue with your business/property plans, keep up with changes in taxes in Malaysia. Being proactive with your stamp duty helps you comply and makes your investment/business decision better.