PETALING JAYA: The Valuation and Property Services Department (JPPH) assesses the market value of any property transferred according to Para 17(1) of Stamp Act 1949.
It stated that where any property is transferred (a) in consideration, wholly or in part, of any debt or of any stock or marketable security; or (b) subject, either certainly or contingently, to the payment or transfer of any money or stock, whether being or constituting a charge or incumbrance upon the property or not, the instrument of transfer shall be chargeable with ad valorem duty calculated at the rates specified under Item 32(a) in the First Schedule upon either the value of the debt, stock or marketable security, as the case may be, or the market value of the property as on the date of execution, whichever be the greater.
In a statement to SunBiz today, JPPH said it is responsible in valuing property transacted for the purpose of stamp duty (taxation) as appointed by the Inland Revenue Board (IRB) according to Para (4) of Stamp Act 1949 which states: “For the purpose only of ascertaining the market value of any property, the Collector may in writing authorise any valuer employed by the Government, whether he be a public officer or a person privately practising as a valuer, to exercise any of the powers conferred upon the Collector by this section.”
JPPH said this when referring to an article, “Determination of market value by govt valuers worrying” (SunBiz, July 31, 2023), contributed by Thannes Tax Consulting Services Sdn Bhd managing director SM Thannermalai.
It said there are a few interpretations for “market value” from different parties, including professional bodies, acts as well as court’s decision in the case of compulsory land acquisition.
In Malaysia, every person/qualified person including government and private valuer must adhere to the standards outlined as per “Malaysian Valuation Standards (MVS)” published by the Board of Valuers, Appraisers, Estate Agents and Property Managers. MVS is a set of guidelines that must be followed by valuers practising in Malaysia in which the standards have been drafted in line with the International Valuation Standard (IVS).
According to MVS, JPPH said, market value is defined as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.
The definition clearly states that market value is not entirely referring to the amount agreed between willing buyer and willing seller, but has to include other factors such as possible relationship between the two parties (subsidiary company). The property also has to be marketed in open market and both buyer and seller should have adequate information regarding the subject property.
Therefore, in order to derive the market value of a property, it said, the subject property has to be studied in detail, including the transaction of similar properties within the vicinity.
The second issue raised by the writer is that when there is a transaction between entirely unconnected third parties which are genuine, it is puzzling for taxpayers to understand why the government valuers ignore the information that is facing them.
Market value definition encompasses a few components – a willing buyer and a willing seller; in an arm’s length transaction; after proper marketing; and where the parties each had acted knowledgeably, prudently and without compulsion
JPPH said MVS define “arm’s length transaction” as one between parties who do not have a particular or special relationship (for example, parent and subsidiary companies or landlord and tenant) that may make the price level uncharacteristic of the market or inflated because of an element of “special value” (defined in MVS 2). The market value transaction is presumed to be between unrelated parties, each acting independently.
In this question, it added, the other three components or market value which are “a willing buyer and a willing seller”, “after proper marketing” and “where the parties had each acted knowledgeably, prudently and without compulsion” shall never be disregarded in assessing market value of the subject property.
The writer’s concern on the tendency by government valuers to ignore independent professional valuers who also use accepted valuation methods can be explained by Standard 11 of MVS which states that the valuer should use appropriate approach(es) or method(s) of valuation in carrying out the valuation. Approaches as stated in MVS are comparison approach, income approach (includes investment method, residual method, discounted cash flow method and profit method) and cost approach, said JPPH.
Besides that, it added, the inability by taxpayers to find out from the government valuation department the basis on which it has arrived at higher valuations can be found in the relevant legislation, such as Stamp Duty within Para 17(1) of Stamp Act 1949.
Where any property is transferred (a) in consideration, wholly or in part, of any debt or of any stock or marketable security; or (b) subject, either certainly or contingently, to the payment or transfer of any money or stock, whether being or constituting a charge or incumbrance upon the property or not, the instrument of transfer shall be chargeable with ad valorem duty calculated at the rates specified under Item 32(a) in the First Schedule upon either the value of the debt, stock or marketable security, as the case may be, or the market value of the property as on the date of execution, whichever be the greater.
The writer’s suggestion for IRB to ensure that taxpayers are given the right to see the basis of the valuation can be explained similar to previous issue which is the basis of the valuation is clearly explained in Para 17(1) of Stamp Act 1949, which is, the instrument of transfer shall be chargeable with ad valorem duty calculated at the rates specified under Item 32(a) in the First Schedule upon either the value of the debt, stock or marketable security, as the case may be, or the market value of the property as on the date of execution, whichever be the greater.
On the writer’s recommendation for the Finance Ministry to deal with this matter and define market value, and interference from the government valuation department on genuine third-party transactions should be stopped, JPPH said it is distinctively stated that market value is defined in detail in Standard 1 of MVS and government valuation department acts within its capacity as stipulated in Para (4) of Stamp Act 1949.
