Final window to catch up on stamp duty compliance

[30th Jan – The Edge]: The Inland Revenue Board of Malaysia (IRBM) has rolled out the Stamp Duty Voluntary Disclosure (SD-VD) programme on Jan 28, offering businesses an opportunity to address past stamp duty non-compliance with a 100% penalty waiver. 

Malaysia has had a Stamp Act since 1949 without an overhaul on the scope of the instruments subjected to duty. Neither did the scope change materially now but it is a common cause for sleepless nights for many professionals and corporate leaders over recent months — a result of active engagements from IRBM and the roll out of Stamp Duty Self-Assessment System (SD-SAS) which places the onus on duty payers to get the right duty treatment.

The scope of stamp duty extends far beyond employment contracts, for which a ministerial exemption was announced last year for pre-2025 employment contracts. 

Intragroup financing agreements and rental or lease agreements handled by the finance department, service agreements handled by procurement, Non-Disclosure Agreements (NDAs) and trade agreements handled by sales function, and digital marketing campaign agreements handled by the marketing department are just a few examples of instruments often subject to stamp duty. In some cases, the duty is at Ad Valorem rate such as 0.1% of contract value for service agreements and 0.5% for lease of equipment, while in other cases a nominal duty of RM10 applies. But, the penalty for non-compliance prior to 1 January 2026 was subject to a minimum of RM100 per instrument (or, if higher, 20% of the duty underpaid). Yes, the penalty could be 10 times of the duty amount in cases where nominal stamping applies.

The exemption for pre-2025 instruments is only for employment contracts. How about the other instruments for which compliance was inadvertently overlooked in the past years? The SDVD programme that was launched on Wednesday allows businesses to have any instruments executed (put simply, signed) on any date between Jan 1, 2023 to Dec 31, 2025 to be stamped without any penalty. 

Put simply, pay the full duty and get full waiver of non-compliance penalty. The beauty of this programme also lies in the fact that the penalty waiver is automatic; no application is to be made to IRBM.

Businesses can simply submit the eligible instrument for adjudication before June 30, 2026 and ensure that the duty is paid before June 30, 2026. Upon submission of instruments for stamping via IRBM’s MyTax portal, a penalty would be reflected in the notice of assessment, but such penalty would be automatically waived upon full payment of the stamp duty by June 30, 2026. 

The IRBM has provided assurance that instruments stamped under the SD-VD program will not be subject to audit. However, such benefit of the programme would not extend to cases involving elements of fraud or intentional attempts to evade stamp duty. Hence, we advise businesses that diligent review of the applicable stamp duty treatment for each instrument must be part of the governance and compliance framework. 

Also, participation in the SDVD programme does not preclude the businesses from being audited in respect of other instruments that are not submitted for stamping under the programme.

It is important to note that instruments executed before Jan 1, 2023 or after Dec 31, 2025 are not eligible for the SD-VD programme. However, pursuant to an earlier announcement by the IRBM, any stamp duty return form submitted in calendar year 2026 would not attract penalty in respect of any undercharged duty.

Here is our recommended action step for businesses to do prior to June 30, 2026: 

Should only step 3 be completed by June 30, but not step 4, the instrument would not be eligible for the benefits of SD-VD. 

With all that, June 30 is not a long time away. While businesses are now busy adapting to IRBM’s new online platform for stamping, it is equally important to prioritise an internal review for the agreements executed in the last three years without adjudication. Businesses should also make conscious decisions with regards to instruments stamped earlier than 2023, such as an intragroup financing agreement signed 10 years ago and still active at present. 

Historically, stamp duty was not always treated as a mainstream compliance focus. As a result, businesses may have inadvertently overlooked stamping of instruments that do not involve a law practice. The SD-VD programme provides a valuable window for taxpayers to close these compliance gaps without incurring penalties.

Take for example an entity which had signed 10,000 instruments during the calendar years 2022 to 2025 for which it was liable to pay stamp duty of RM10 each but overlooked doing so. If the adjudication and payment of duty is done by June 30, 2026, the total financial exposure would be RM100,000. But, if the duty is not paid by June 30, 2026, the penalty applicable would be RM1 million, being RM100 penalty for each instrument. Hence, the entity would be subject to financial exposure of RM 1.1 million. This is just one example; there are many reasons why businesses should act fast with proper professional assessment within the next few months. 

Thenesh Kannaa is an executive director of TRATAX Sdn Bhd, an independent consulting firm specialising in tax, SST, stamp duty and transfer pricing.