STAMP DUTY EXEMPTION – MALAYSIAN REGULATION ON PROPERTIES

There are many rules and regulations that can either directly or indirectly affecting the property investments, hence it is very important for us to be well-informed on the rules and regulations in order to take full advantages of the incentives available and what type of property investment that we can make.

What is a stamp duty? It is a lump-sum tax that anyone who buys property or land costing more than set amount has to pay. The rate where you will be paying the tax however will vary based on the price and the type of the properties.

Stamp duty is also known as Memorandum of Transfer which serves as a prescription to instruct the land office to transfer the property that you have purchase

from the developer to your name. This will serve as a window of opportunity for those who would like to purchase their first time property.

Types Of Stamp Duty

There are two known types of stamp duty we practiced in Malaysia which is ad valorem duty where the amount payable will be varied depends on the types and value of the instruments and the other one will be the fixed stamp duty which is imposed without any relation to the consideration paid or the amount stated in the instrument.

There are however few of the sectors that are exempted from paying the stamp duty which are as follows:

Islamic fund management

Full exemption for income tax is available on statutory income on management fees that is received by resident fund management companies for managing funds of foreign and local investors that is established under the Syariah principles (until year of assessment 2020). Such funds are subjected to be approved by the Securities Commission.

Business Trust (BT)

BT is established under the Capital Market and Services Act 2007 and is known as a hybrid structure that combines elements of a company with elements of a unit trust. The BT is given the same income tax treatment as to that of a company. The following incentives are given on a one-off basis at the initial stage of establishment of the BT:

• Stamp duty exemption on instruments of transfer of businesses, assets, or real properties acquired for instruments executed from 1 January 2013 but not later than 31 December 2017.
• The disposer of real properties or shares in RPCs to BT is given RPGT exemption for disposal of real properties or shares in RPCs from 1 January 2013 but not later than 31 December 2017.

Real estate investment trusts (REIT)/Property trust fund (PTF)

REIT/PTFs are sort of vehicles that mobilize funds from unit holders that comprise individuals and companies for investments in the property sector and related assets. REIT/PTFs are exempted from tax on all kind of income, provided that at least 90% of their total income is being distributed to unit holders. Effective from year of assessment 2017, this exemption will only applies to REIT/PTFs that are listed on the Bursa Malaysia.

Other incentives available are:

• RPGT and stamp duty exemptions on disposal/transfer of real property to an REIT/PTF.
• Tax deduction will be given for consultancy, legal, and valuation service fees incurred on the establishment of an REIT.

Criteria to Be Exempted

Lembaga Hasil Dalam Negeri Malaysia provides stamp duty relief based on certain cases under Section 15 / Section 15A of the Stamp Act 1949 where these are applicable:

1.Reconstruction of company / companies;

• If a business owner wants to rebuild or reconstruct the companies then they will be given stamp duty relief for their intention.

2.Amalgamation of companies; or

• If a company merges with another company then they will also be given the stamp duty relief from the results of their union.

3.Transfer of real property between associated companies.

• It is also applicable for the transfer of real property between two associated companies where they will also be excluded from paying the stamp duty.

There are few personal criteria in order to get you eligible for such scheme. From the 2017 budget it is announced that stamp duty will be increased to 100 percent on instrument of transfer in order to reduce the cost of ownership for first home owner compared to the current 50 percent exemption.

However the exemption is limited to the house cost up to RM300 000 for first home buyers and only available throughout the period of 1 January 2017 till 31^st December 2018.

For the person who is applying for the loan, they should be paying their other loans promptly because if not the chance to get decline is high. Debts Service Ratio (DSR) under this Scheme must always be 1/3 of your income but there are exceptional cases up to 50%-60% with evidence of good saving habit.

But the person should be a Malaysian citizen and also buying house for the first time in his or her life in order for them to be eligible for the scheme. The individual however should age up to 35 years old. Gross income should not exceed RM5000 per month especially for single borrowers or combined gross income of RM10000 for couple.

Besides fulfilling the personal criteria there are also property criteria that need to be fulfilled for the scheme. First thing is that the property value must be minimum of RM100000 while the maximum value of the property up to RM400000 and this applies to residential properties only. The property must be occupied by owner while for least hold, remaining least must be more or exactly 60 years.