Malaysia Stamp Duty: Revised Rules and Self-Assessment System Explained

1. What is Stamp Duty?

Stamp duty is a tax duty imposed on “instruments” rather than transactions. An instrument is defined as any written document and in general, stamp duty is levied on legal, commercial and financial instruments.

• Sale and Purchase Agreements
• Transfer Documents
• Loan Agreements
• Mortgage and Security Documents
• Leases and Tenancies
• Share Transfer Documents
• Debentures
• Partnership Agreements
• Memorandum of Understanding
• Insurance Policies
• Trust Deeds
• Power of Attorney
• >Employment Contract

 If you are signing a legally binding document, it is likely that stamp duty will be applicable in accordance with the relevant laws and regulations.

This duty is payable to the Inland Revenue Board of Malaysia (IRBM).

2. The Importance of Stamp Duty

Under the Stamp Act 1949, certain instruments must be properly stamped to be considered legally enforceable. Legal documents that are not stamped, or are incorrectly stamped, may be rejected as evidence in court, potentially jeopardizing legal claims or defences. Proper stamping is also essential for the official transfer of property ownership, ensuring that the transfer is recognized by the relevant authorities. Furthermore, failing to stamp documents in a timely manner may result in penalties being imposed by the authorities, making compliance both a legal obligation and a financial safeguard.

3. Stamp Duty Self-Assessment System (SDSAS), With Effect from 1 Jan 2026

From 1 January 2026, the IRBM will implement a Self-Assessment System for stamp duty. Under this new framework, taxpayers will be responsible for calculating and declaring stamp duty. This means that individuals and entities will need to self-assess the applicable duties, submit declarations and ensure timely payments, in accordance with the relevant laws and guidelines.

4. Stamp Duty on Employment Contracts

The IRBM has announced that, with effect from 1 January 2025, employment contracts will be subject to stamp duty. Employment contracts signed between 2022 and 2024 were also subject to stamp duty, however these will now be exempt. Only employment contracts entered into on or after 1 January 2025 will be subject to stamp duty. The IRBM will waive the penalty for any late stamping of employment contracts, provided they are stamped by 31 December 2025 at the latest.

5. Implementation of the Malaysia Stamp Duty Self-Assessment System (SDSAS) in Three Phases

Notes:

• Penalties for non-compliance: Failure to accurately self-assess and pay stamp duty may result in fines and penalties.
• Record keeping: Taxpayers are required to maintain records of stamped instruments and related documents for a period of 7 years.
• Audit Framework: The IRBM has implemented a Stamp Duty Audit Framework effective 1 January 2025 to facilitate this transition.

Rates of Duty

The rates of the duty vary according to the nature of instrument and the value of the transaction.

The newly proposed rates of stamp duty, which will be effective from 1 January 2025, are as follows:

A) Life insurance policies received as a gift or through a trust will be subject to a fixed rate depending on the sum insured.

* Any other case apart from the above would be subject to an ad valorem stamp duty of between 1% and 4% of the sum insured.

B) Stamp Duty on cheque-related documents is chargeable and will increase from RM0.15 to RM1.00 for each cheque leaf issued.

C) For loan or financing agreements based on Syariah principles for the purchase of goods (as defined in the First Schedule of the Hire Purchase Act 1967), stamp duty is fixed at RM10.00.

D) Currently, ad valorem stamp duty is only imposed on the exchange or partition of real property when consideration, such as cash or other property, is involved. However, effective 1 January 2025, all exchanges or partitions of real property will be treated as sale and purchase transactions, regardless of whether consideration is present. As such, ad valorem stamp duty will be levied on the value of the property involved.

A fixed stamp duty of RM10 will apply — instead of ad valorem duty — in the following scenarios involving the exchange, partition, or division of real property:

• The transfer is between co-owners who were all original owners of the property.
• The exchange is between an individual and a Ruler of a State or the Government of Malaysia or any State.
• The transfer is between close family members, such as husband and wife, parent and child, grandparent and grandchild, or siblings.

E) The stamp duty treatment for instruments relating to the lease or agreement for lease of any immovable property has been amended as below:

The above proposed stamp duty rates also apply where the average rent or lease is RM2,400 or less.

7. Penalty for Late Stamping, With Effect from 1 Jan 2025

Stamping should be completed within 30 days of the contract being signed, missing this deadline will lead to penalties from IRBM. The penalty for late submission is as follows:

8. Penalty for Non-Compliance, With Effect from 1 Jan 2026

Duty payers who commit an offence may be subject to the following penalties upon conviction:

Summary - New Responsibilities for Taxpayers

Under the Self-Assessment System for Stamp Duty, Malaysian taxpayers will assume full responsibility for determining, calculating, and declaring stamp duty obligations. Under this new system, taxpayers must assess whether an instrument is chargeable, calculate the correct duty, and submit the declaration independently via the STAMPS platform, without prior assessment or confirmation from the IRBM.

Given this shift, it is crucial for taxpayers to have a thorough understanding of stamp duty regulations. Errors or omissions in assessment or reporting may result in audits, penalties and substantial fines. Proper compliance and due diligence are therefore essential to avoid costly consequences.