Stamp Duty – A Comprehensive Guide to Stamping Agreement with LHDN
Stamp duty is a tax levied on legal transactions involving the transfer of assets or property. It is a form of indirect tax that is paid to the government by the parties involved in a transaction. In Malaysia, stamp duty is governed by the Stamp Act 1949, which provides for the rates and procedure for the payment of stamp duty on various types of transactions.
One of the most common transactions that require stamp duty in Malaysia is the execution of a legal agreement. If you are involved in such a transaction, it is important to know how to stamp your agreement with the Inland Revenue Board (Lembaga Hasil Dalam Negeri or LHDN) to avoid any legal consequences.
In this article, we will discuss the procedure for stamping an agreement with LHDN, the rates of stamp duty applicable, and the consequences of non-compliance.
What is Stamping of Agreement?
Stamping of an agreement refers to the process of affixing a stamp or adhesive on the agreement to signify that stamp duty has been paid on it. The stamp duty payable on an agreement is calculated based on the value of the transaction or consideration involved. The agreement must be stamped within 30 days from the date of execution or signing of the agreement.
Procedure for Stamping an Agreement with LHDN
If you are involved in a legal transaction that requires the execution of an agreement, you will need to follow the following steps to stamp your agreement with LHDN:
Step 1: Identify the Stamp Duty Payable
The first step is to determine the stamp duty payable on the agreement. The stamp duty payable depends on the nature of the transaction and the value of the transaction or consideration involved. You can use the online stamp duty calculator provided by LHDN to calculate the stamp duty payable.
Step 2: Purchase the Appropriate Stamp Duty
Once you have determined the stamp duty payable, you will need to purchase the appropriate stamp duty from any authorised stamp duty vendor or LHDN.
Step 3: Affix the Stamp Duty on the Agreement
The next step is to affix the stamp duty on the agreement. The stamp duty must be affixed on the agreement with adhesive or embossed with a seal.
Step 4: Submit the Agreement for Stamping
After affixing the stamp duty, you will need to submit the agreement to LHDN for stamping. You can submit the agreement either in person or online through the stamp duty e-portal.
Step 5: Collect the Stamped Agreement
Once the agreement is stamped, you will need to collect the stamped agreement from LHDN. The stamped agreement will serve as proof that stamp duty has been paid on the agreement.
Rates of Stamp Duty Applicable
The rates of stamp duty applicable depend on the nature of the transaction and the value of the transaction or consideration involved. The following table shows the stamp duty rates applicable under the Stamp Act 1949:
Nature of Transaction Rate of Stamp Duty
Sale and Purchase Agreements (immovable property) Up to RM100,000 – 1% RM100,001 to RM500,000 – RM1,000 + 2% of the amount exceeding RM100,000 RM500,001 and above – RM9,000 + 3% of the amount exceeding RM500,000
Lease Agreements (immovable property) Total rental payable (including any premium) is up to RM2,500 – RM1 Total rental payable (including any premium) is more than RM2,500 – RM2 for every RM1,000 or part thereof
Tenancy Agreements (movable property) Up to 3 years – RM1 for every RM10 or part thereof of the annual rental payable 3 to 5 years – RM2 for every RM10 or part thereof of the annual rental payable More than 5 years – RM3 for every RM10 or part thereof of the annual rental payable
Consequences of Non-Compliance
If you fail to stamp your agreement within the prescribed time limit, a penalty will be imposed. The penalty is 10% of the stamp duty payable or a maximum of RM500, whichever is higher. In addition, the agreement will not be admissible as evidence in court. Therefore, it is important to ensure that your agreement is stamped within the prescribed time limit to avoid any legal consequences.
Stamp duty is an important tax that must be paid on legal transactions involving the transfer of property or assets. Stamping of an agreement is a crucial step in ensuring that the agreement is legally binding and admissible in court. By following the above procedure, you can ensure that your agreement is duly stamped with LHDN and avoid any legal consequences.