THERE will be a big change in the stamp duty regime from the official assessment system where the tax authorities will determine the duty payable to the self-assessment system where the taxpayer will self-assess the duty from Jan 1, 2026.
Effectively the responsibility for determining the duty is now shifted from Inland Revenue Board (IRB) to the taxpayer. If you make a mistake, you will be “hammered” with penalties. It can be a massive difference between the position taken by the taxpayer versus the IRB – the difference could range between RM10 and millions of ringgit if it is a high value transaction involving ad valorem duty which can be a maximum of 4% of the value of the transaction.
Since taxpayers have not been paying much attention to the Stamp Act in the past due to the lack of compliance monitoring by IRB and the taxpayers are unaware of the provisions in the Stamp Act, it will be of no surprise if taxpayers are going to be “hit” with additional taxes and significant penalties.
The headaches faced by taxpayers will be: whether to stamp a document or not; at which rate of duty it should be stamped; what value should the stamping be based on; timing of the stamping; understanding the substance of the document. These are not easy questions to answer because the language used in the Stamp Act is antiquated as the act was initially enacted in a different era back in 1949.
Penalty pains
The basic penalties that taxpayers will face will start with the late stamping of documents – if documents are stamped within three months of the due date of stamping the penalty will be RM50 or 10% of the deficient duty or whichever is higher. The same principle will apply if the documents are stamped after three months, with the duty being increased to RM100 or 20%, whichever is higher.
Failure to furnish a return can trigger a maximum penalty of RM10,000 on conviction and submitting an incorrect return can similarly on conviction be subject to a fine of RM1,000 and not more than RM10,000 plus a special penalty. The Stamp Act is “littered” with many more penalties throughout the Act.
Akan datang: What’s next
The self-assessment regime will be implemented in three phases:
Phase 1 – Jan 1, 2026 will apply to instruments or agreements related to rental or lease, general stamping and securities; Phase 2 – Jan 1, 2027 will apply to nstruments or transfer of property ownership; and Phase 3 – Jan 1, 2028, all other instruments.
Under the self-assessment system documents that need to be stamped must be submitted for stamping within the stipulated timeframe along with the return to IRB in the Stamp Portal. It must be electronically submitted. If there is an error in the calculation, IRB has the right to audit and reassess the amount owed within five years starting from when the duty was paid or should have been paid. The burden of ensuring that the correct duty is paid is entirely now shifted to the shoulders of the taxpayer.
Taxpayers have the duty to keep records to substantiate their stamp duty filing for seven years from the date the duty is paid.
How to face the oncoming “tsunami”
High standards of governance with a clear tax policy must be set by the board of directors. This will involve establishing internal controls to ensure that all instruments are properly evaluated by responsible and educated members of the management team.
The senior members of the management who will be responsible for managing the process should be able to identify the risk, evaluate the risk, and have the capability to manage the risk before the risk crystallises. It will include the finance team, the legal team, and members of the senior management to set the policy and procedures to be followed, supervised and authorised to take decisions.
This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com).
