China Desk Alert - Malaysia Covid-19 Legal Update M&A Focus — Stamping of Documents.
Legal News & Analysis - Asia Pacific - Malaysia - Regulatory & Compliance - Corporate/M&A
3 April, 2020
You or your clients may have agreements and documents which are required to be stamped in Malaysia during the closure period between 18 March 2020 until 14 April 2020 following the introduction of the Movement Control Order ("MCO")1. This serves as a guide for your reference.
Generally, Section 47 of the Stamp Act 1949 ("SA 1949") requires a document to be stamped within 30 days of its execution if executed within Malaysia, or if executed outside Malaysia, within 30 days after it has been first received in Malaysia2. Otherwise, there will be late stamping penalties imposed3. Once a document is submitted to the Inland Revenue Board of Malaysia ("IRB") for stamping, the 30-day timeline for stamping a document stops running.
Prior to the MCO, the manner in which documents are submitted for stamping depends, largely, on whether the documents are subject to a nominal stamp duty (that is, RM10) or ad valorem stamp duty. Documents that are subject to nominal stamp duty are generally required to be submitted for stamping over the counter (that is, at IRB offices) or be affixed with Revenue Stamps that can be pre-purchased from post offices. Documents subject to ad valorem stamp duty are generally required to be submitted online via the e-stamping portal for assessment. Once the assessment is done, stamp duty payment can be made.
However, all IRB premises nationwide will be closed during the MCO period (that is, 18 March 2020 to 14 April 2020). It is important to know how this will impact the stamping process and we have highlighted two scenarios below taking into account the FAQ issued by IRB4.
Documents to be stamped during the MCO period:
- For documents that attract nominal stamp duty pursuant to the Item 4 of the First Schedule of SA 1949 (for example, agreement or memorandum not specially charged with any duty such as sale and purchase agreements for houses), the stamp duty payer may pre-purchase Revenue Stamps from post offices, to be affixed on the documents. The affixation can be done by the person who signed the document5. However, the payer should take into account the travelling restriction imposed under the MCO when considering whether to purchase Revenue Stamps and that the affixation process may not be straightforward.
- For other documents that attract nominal stamp duty, but not listed in the Second Schedule of SA 1949, the stamp duty payer may still pre-purchase Revenue Stamps, but the stamps can only be affixed at a IRB office6. As the IRB offices are currently closed during the MCO period, the stamp duty payer may consider submitting the documents manually over the counter after the MCO is lifted.
- For documents that are subject to ad valorem stamp duty, they can be submitted for stamping via the e-stamping portal that is still accessible during the MCO period. However, it is important to note that the actual assessment process will still need to be done manually and as the IRB offices are closed during the MCO period, some delay to the assessment process may be anticipated. For example, in the case of stamping of share transfer forms, the timing of the current manual assessment process would likely take longer than usual and may in turn give rise to delays in the completion of the transfer of legal ownership of the shares.
Documents where deadline for stamp duty payment falls on a date during the MCO period:
- The deadline to pay stamp duty has been automatically extended to 30 April 2020 and there will not be any late payment penalty imposed for payments made within the extended deadline.
- However, if the duty payer prefers to pay the stamp duty during the MCO period, as regards documents subject to ad valorem stamp duty, stamp duty can still be paid online via the e-stamping portal during this MCO period. Once payment has been made successfully, a stamp certificate can be printed from the e-stamping portal and it must be attached to the physical agreements/documents as proof of payment of stamp duty. This is important in terms of timing, especially in the case of stamping share transfer form(s), where the change of legal ownership of the shares can only be registered once the stamp duty has been paid and share transfer form(s) is stamped.
In view of the above, a stamp duty payer should plan ahead and make all necessary arrangements taking into account the current circumstances and the guidance set out in the FAQ7, when arranging documents for stamping to avoid any late stamping penalties. If you need any legal assistance on this, please contact us.
For further information, please contact:
Nicholas Tan, Partner, Shearn Delamore & Co