STAMP DUTY is applicable on all agreements specified in the First Schedule of the Stamp Act 1949. The agreements are referred in the Act to as “instruments”. This is a tax on the instruments and generally the tax is based on a fixed fee, or it is calculated based on the value of the transaction or property.
Recently there has been significant increase in the awareness of need to comply with stamp duty due to the substantial increase in penalty for non-compliance coupled with the fact that the Inland Revenue Board (IRB) has increased its level of audit scrutiny in this area. Taxpayers are now facing unexpected assessments.
Until recently, many taxpayers were under the assumption that unless an instrument needs to be adduced as evidence in court, there is no necessity to have it stamped.
Consequently, most intercompany documents were not stamped. This has become an easy target for IRB when it conducts audits to collect the outstanding taxes and the penalties.
The government realises the predicament faced by taxpayers and decided to alleviate their “pain” through the introduction of the Self Voluntary Disclosure Programme (SVDP) for a period from Jan 1, 2026 to June 30, 2026. In summary, the SVDP involves granting exemption from penalty if taxpayers volunteered to declare the instruments that have not been stamped during the period from Jan 1, 2023 to Dec 31, 2025.
Normally, penalty would have been imposed on late stamping in the region of RM50 or 10% of the unpaid duty, whichever is higher, if the instrument was stamped within three months after the due date or the rate increases to RM100 or 20% of the unpaid duty, whichever is higher for all cases.
As the law stands, IRB has the power to go back up to five years from the date the duty would have been paid. In the case where there is fraud, wilful default or negligence, the five-year time bar can be overridden, and the IRB can raise an assessment for any number of years.
In the operational guidelines issued by the IRB for the SVDP issued on Jan 1, 2026, the requirement for entering the SVDP is three years going back to Jan 1, 2023.
There is a gap period of two years if we were to follow the five-year time bar rule which has not been brought up in the guidelines. The assumption we can make is IRB is unlikely to open matters beyond Jan 1, 2023 under normal circumstances.
All the instruments entered under SVDP for the three years will not be audited. The procedure for entering the programme is that each instrument included in the programme should be brought to IRB. You cannot adopt the past practices of the Income Tax SVDP in 2018 and 2021 of merely informing IRB via a letter or correspondence.
Now that taxpayers are becoming more aware of the benefits of the SVDP, the government should consider encouraging more taxpayers to participate in the programme by extending the SVDP period from July 1 to Sept 30. The government should understand that collating the instruments and determining the duty will take time and therefore the additional three months is not an unreasonable request. IRB can also save significant resources from unnecessarily deploying staff to audit taxpayers.
This is a win-win situation for both taxpayers and IRB.
This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com).
The Sun Malaysia
