Legal Update: Cessation Of The 20% Remission Of Stamp Duty For ISLAMIC FINANCING

Pursuant to Stamp Duty (Remission) (No.2) Order 2009, the Minister has makes the order that 20% of the stamp duty payable and chargeable on the principal or primary instrument of financing made according to the syariah principles pursuant to subparagraph 22(1)(a) or subparagraph 27(a) of the First Schedule of the Stamp Act 1949 is remitted subject to the condition that the instrument is approved by the Syariah Advisory Council of Bank Negara Malaysia or the Securities Commission, as the case may be. However this order is only effective from 1 January 2010 until 31 December 2015 and only applicable to Islamic Financing.

As such, any Islamic Facilities Agreement from 1 January 2010 until 31 December 2015 are exempted of 20% from stamp duty provided that the bank has obtain approval for the exemption from Bank Negara Malaysia. However those 20% exemption is not applicable after 31 December 2015 unless the Minister has directed otherwise. As of today, the Minister has not make any order yet pertaining to the Stamp Duty Remission on Islamic Financing after 31 December 2015. Therefore, in order for the Borrower to get the exemption of 20%, then the Facilities Agreement has to be stamped before 1 January 2016. If the Facilities Agreement is not stamped before 1 January 2016, then the Borrower has to pay the stamp duty in full.

With the proposed action plans for 20% stamp duty remisison, the 20% stamp duty remission on the principal instrument of financing is only applicable for HOUSING financing instruments and the housing financing instruments have to be executed on or after 1st January 2016 but not later than 31st December 2017. In other words, the remission is not applicable for commercial loan and hence, the borrower is required to pay the ad valorem stamp duty chargeable on the principal instrument commencing from 1st January 2016.

Published by : Lee & Chong

Date: 18.11.2015

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