By Dickson Loo
Despite the wide-spread usage of stamp duty tax (“SDT”) in our everyday life, it is arguably the lesser well-known sibling of income tax due to its inconspicuous and unobtrusive nature. Whilst the topic of SDT is not likely to raise eyebrows amongst professionals, we occasionally receive general queries on the application of SDT. As such, this article aims to shed some light by briefly discussing the key features and implication of SDT.
Characteristics of Stamp Duty
The application of SDT is governed by the Stamp Duty Act 1949 (“Act”). It is applicable throughout Malaysia. Unlike other forms of taxes and as seen in the case of Lim Teck Lee v Commissioner of Stamps (1956) 22 MLJ 135, SDT is only relevant to instruments as opposed to transactions. In the aforementioned case, Taylor J opined on p.137 the following:
“The fundamental principle is this. The Stamp Acts taxes instruments, not transactions. If there are two ways of carrying out a transaction and the parties are content with the simpler, they are entitled to carry it out in that way.”
From Taylor J’s statement above, it is clear that not all contractual relationship is taxable. An example includes an oral contract whereby promises are given and accepted on a verbal basis.
On the basis where an instrument is involved, the SDT imposed by the Act can be further divided into two different categories, these are:
- Fixed duty; and
- Ad valorem duty.
In general, ‘fixed duty’ as hinted in its name, is a fixed sum which is not dependent on the value of the transaction as specified in the instrument (eg. statutory declaration, appointment agreement). On the other hand, ad valorem duty charges a sum that varies in accordance with the value of the transaction as specified in the instrument (eg. disposal of properties, loan agreement). The full list of instruments and their respective SDT types are listed under the First Schedule of the Act.
The Implication of an Unstamped Instrument
In accordance with section 52(1) of the Act, an unstamped instrument will not be allowed to be acted upon, registered, or authenticated by any such person or by any public officer unless the instrument is duly stamped. The issuance of shares warrant or stock certificate pursuant to an unstamped instrument, and the enrollment or registration of an unstamped instrument will also attract unnecessary trouble in light of the provision under section 69 of the Act whereby the following is stated:
“(1) If a share warrant or stock certificate to bearer is issued without being duly stamped, the company issuing the same, and also every person who, at the time when it is issued, is the managing director or secretary or other principal officer of the company, shall be liable to a fine not exceeding one thousand five hundred ringgit.
(2) If any person whose office it is to enrol, register, or enter in or upon any rolls, books or records any instrument chargeable with duty, enrols, registers or enters any such instrument not being duly stamped, he shall be liable to a fine not exceeding one thousand five hundred ringgit.”
Further, under section 52(1) it is also expressly stated that an unstamped instrument will not be admissible as evidence in the court (barring some exceptional circumstances). It is therefore unsurprising when the court adopted a similar approach to the matter as seen in the case of Octville Golf Properties Sdn Bhd v Uniwheels Sdn Bhd  8 MLJ 558 whereby Vernon Ong J stated at paragraph 28:
“…the ad valorem stamp duty must be paid in accordance with the SA 1949 in the manner described above. Failure to pay the duty or the penalty prevents the use of the tenancy agreement in this proceedings. As the tenancy agreement is not a duly stamped instrument, it is the duty of this court under s 51 to impound the tenancy agreement.”
The same approach will also be adopted for copies of an unstamped document, as seen in the case of Chiew Vui Kiet v Chong Fook Tien 2 MLJ 158.
Notwithstanding the above, it should be noted, however, if the unstamped instrument is subsequently stamped, the said instrument will be admissible as evidence in court. That said, if an instrument is not stamped within the stipulated period of time, penalty charges will be imposed and the severity of the penalty charges will be dependent on the length of the delay.