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Stamp Duty Exemption For Property Transaction in Malaysia

There is a major Malaysian federal government announcement regarding property tax duties for property transaction involving parents, grandparents and child.

This announcement is made via Federal Government Gazette under the STAMP DUTY (EXEMPTION) (NO. 3) ORDER 2023.

The recent update pertains to the provisions stated in Section 294(1) of the National Land Code of Malaysia. According to this section, every instrument for land transfer presented for registration must consist of a single original document duly stamped in accordance with the provisions of the Stamp Act 1949 [Act 378].

Under Section 4 of the Stamp Act 1949, it outlines that several instruments specified in the First Schedule of the Act that are subject to various duties or taxes. Property transaction is also stated in this schedule and since property can only be transacted via an instrument as per Section 294(1) of the National Land Code, it draws the imposition of Stamp Duty.

It's important to note that the Stamp Act 1949 defines a sale, as mentioned in Section 2, as any instrument, decree, or court order that transfers property, an estate, or an interest in any property to a purchaser or any other person acting on their behalf or as directed by them. This broad definition ensures that various forms of property transfers are subject to the relevant stamp duties.

However, there are certain flexibilities within these regulations. Under Section 80 of the Stamp Act 1949, the Minister of Finance has the authority to issue orders, published in the Gazette, to exempt specific classes of instruments or individual instruments from duty that would otherwise be chargeable under the Act.

This provision empowers the Minister to grant exemptions based on the nature of the instrument or the individuals involved in the transaction.

Furthermore, the Minister of Finance also has the discretion to exempt any instrument or all instruments in relation to any scheme from duty, which would otherwise be chargeable under the Stamp Act. In specific cases, the Minister may also choose to reduce or remit the duties with which any instrument or all instruments in relation to any scheme are chargeable under the Act.

In line with this announcement, the government has recently gazetted the STAMP DUTY (EXEMPTION) (NO.3) ORDER 2023. This order, made under the powers conferred by subsection 80(1) of the Stamp Act 1949 [Act 378], provides specific exemptions from duty. The aim is to ease the burden of stamp duty on certain types of property transfers.

To make it easier for our readers to understand, let's break down the key points of the order:

1. The order exempts stamp duty on all instruments of transfer of any immovable property that function as a voluntary disposition inter vivos (transfer of title under love and affection) (meaning, transfers during the donor's lifetime) from the specified donor (as mentioned in column 2 of the Schedule) to the recipient (as mentioned in column 3 of the Schedule). In other words, no tax for property transfers! But of course there are requirements to qualify.

2. The exemption of stamp duty, as stated in point 1, is limited to the stamp duty charged on any first property worth One Million Ringgit Malaysian or less from the value of the immovable property. If however the property is worth more than One Million Ringgit, the next value of Stamp Duty would entitled you to obtain fifty percent stamp duty exemption on the chargeable on the remaining amount of the property's value.

3. The exemption of stamp duty mentioned above will only apply if:

a. The instrument of transfer of the immovable property is executed on or after 1st April 2023.

b. The recipient is a Malaysian citizen.

Aside from the above only the following people can enjoy such benefits:

* Donor (column 2): Mother or Father, Mother and Father, Child, Grandfather or grandmother, Grandmother and grandfather, and Grandchild.

* Recipient (column 3): Mother or Father, Mother and Father, Child, Grandfather or grandmother, Grandmother and grandfather, and Grandchild.

These measures have been put in place to encourage and facilitate property transfers, particularly among certain family members, by reducing the financial burden associated with stamp duties. We are not sure how long this exemption policy would last so do take action now.

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The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.

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