THE Stamp Office of the Inland Revenue Board (IRB) has been visiting taxpayers to review their compliance with the stamp duty legislation. In this connection, they have been reviewing all written agreements to determine whether the agreements should have been stamped. If they have not been stamped, the IRB is advising the taxpayers to have them stamped together with paying a late stamping penalty.
There is confusion as to whether the Stamp Act 1949 forces taxpayers to have their instruments stamped. The law as it stands does not compel taxpayers to have all their instruments stamped.
However, certain transactions cannot be undertaken without stamped documents. Examples of such transactions will be transactions involving the transfer of real property, transfer of shares, documents that need to be presented during litigation in a court of law, documents that need to be produced when applying for stamp duty exemptions, documents that need to be presented to financial institutions in the course of applying for loans, etc.
One must carefully determine whether a stamped document is needed to complete the transaction.
From Jan 1, 2026, the self-assessment regime will apply to stamp duty in stages. With this change, it becomes compulsory for instruments to be stamped. If that is not done, new provisions in the Stamp Act have been added effective from Jan 1, 2026, to allow the director-general in that year or within five years after the date the duty was paid or would have been paid to raise an assessment or additional assessment.
Common instruments that will be affected
There are many instruments which taxpayers do not usually bring for stamping and could be exposed under the new provisions in the Stamp Act, such as employment contracts, engagement letters for services, lease and tenancy agreements, and instruments between related parties for provision of financing or services. Instruments of transactions with third parties where litigation is not expected are usually not stamped.
In preparation for the self-assessment regime which comes into effect from Jan 1, 2026, the IRB’s visits are an initiative to educate taxpayers on their responsibilities and obligations, clarify legal provisions, and to encourage voluntary compliance with the new provisions in the Stamp Act.
However, we understand from the marketplace that IRB, during its visits to the taxpayers, is highlighting that if the instruments are not stamped, the taxpayers will be penalised for the non-stamping of such instruments. This does not align with the existing Stamp Act provisions and the objectives of the recently issued Stamp Duty Audit Framework, where the primary objective is intended to promote voluntary compliance.
As the new provisions under the Stamp Act are set to take effect on Jan 1, 2026, it would seem reasonable for the IRB to apply the new stamping requirements only to instruments executed from that date onwards. Applying these provisions retrospectively to earlier instruments and imposing late stamping penalties may not align with the intended spirit of the law.
The way forward
Compliance with the stamp duty legislation will be enhanced through efforts that have to be initiated by the IRB to educate taxpayers in understanding the complex and archaic provisions in the Stamp Act 1949. The English language used in this legislation is not familiar to the current generation. This leads to interpretational difficulties which can result in errors in classifying the type of instruments. A wrong classification of the instrument will lead to the incorrect payment of stamp duty.
Developing an FAQ dealing with many potential common scenarios that are of concern to taxpayers will provide answers to the questions troubling taxpayers. This can be collected from taxpayers, tax consultants, industry players, and from the IRB’s experience in processing stamp duty applications.
This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com).
