Stamp duty is a thing we perhaps take for granted and it’s one of those things a lot of folks never think about.
You buy a house; you have to pay stamp duty. That’s a huge simplification of an important process, however.
So, we want to get to the bottom of this mystery and help everyone understand a little more about the history of stamp duty, and what that means today. It’s time to take a trip through property tax history!
The Short History of Stamp Duty
Stamp duty is named after the physical process of ‘stamping’ a document. But mind you that doesn’t mean you can just run out and buy a letter stamp and start earning big money.
Stamp duty was first introduced in England in 1694, as a transaction tax designed to raise money in the war against France. England and France loved a good war back in the 15th/16th/17th/18th… actually, almost all the centuries…
Stamp duty was originally applied to a limited range of goods but was later expanded to cover all manner of weird and wonderful products.
In the 18th and 19th centuries, stamp duty at one time or another applied to hats, gloves, lottery tickets, newspapers, pamphlets, adverts, perfumes, and even hair powder!
Stamp duty had always been a lucrative affair. By 1702/03, less than a decade since its introduction, it was reportedly generating a total value of GBP91,206 for England.
That was a tidy figure back in the day — equivalent to about GBP10 million in today’s currency.
The Beginning of Property Stamp Duty in Malaysia
While the figures and coverage have changed significantly, that ability to raise funds for the government provides the important foundation of stamp duty that is still valid today.
Stamp duty expanded over the following century in England. The attempt to apply it in the colonies of the Americas was a major trigger to the American War of Independence.
England being England, that didn’t stop them from exporting laws and taxation, however.
Malaysia was one of the many recipients of such policies, with British common law comprising one of the two pillars of Malaysia’s justice system still today. Another element of colonial processes we adopted was stamp duty.
The first legislation on stamp duty was introduced in Malaysia in 1949, under the First Schedule of Stamp Duty Act 1949.
Stamp duty can be applied as either ‘ad valorem’ duty, where the amount is payable depending on the value of the instrument transacted, or through a fixed duty.
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Stamp Duty on Loan Agreement
You might be wondering how the rates for stamp duty are calculated. Stamp duty isn’t a static tax – it changes based on government policy, influenced by market and financial conditions.
Stamp duty is paid on a range of property transaction instruments in Malaysia, including the Sale and Purchase Agreement (SPA).
Malaysian property buyers are also required to pay stamp duty on the instrument of transfer, and the loan agreement, as well as for stamping of a tenancy agreement.
Stamp duty on the instrument of transfer is often where the more substantial payment requirement comes in.
PropertyGuru Tip
First-time homebuyers currently benefit from various government exemptions, which you can find out more about on our stamp duty guide.
Stamp Duty is a Legal Requirement!
That means that it comes with rules about when and how it must take place! In Malaysia, a document must be stamped within 30 days of the date it was executed or signed.
That means if you are a homebuyer, you have 30 days from signing your SPA through to having it officially stamped.
If you miss this deadline, a penalty payment may be applied for late stamping. That payment depends on just how late it is!
- RM25 or 5% of the deficient duty, whichever is the greater, if stamped within 3 months after the time for stamping;
- RM50 or 10% of the deficient duty, whichever is the greater, if stamped after 3 months but not later than 6 months after the time for stamping;
- RM100 or 20% of the deficient duty, whichever is the greater, if stamped after 6 months from the time for stamping; may be imposed.
If you somehow lose that document for 6 months, you could be due a rather hefty fee when you finally get it around to having it stamped!
Stamp Duty Appeals
Don’t worry though, you do have a right to appeal. An individual can appeal to the Collector of Stamp Duties if they feel their penalty is unfair. The Collector will assess and issue a written decision on the penalty.
If the individual is still dissatisfied after that appeal, they can request a judicial review at the High Court.
Obviously taking things to the High Court is a fairly serious and time-intensive route, so it’s best reserved for the most serious penalties!
Stamp Duty Rate, Exemptions & Changes in 2024
The stamp duty for a Memorandum of Transfer (MOT) and Deed of Assignment (DOA) is calculated according to a fee structure of 1% to 4%.
The stamp duty for a Sale and Purchase Agreement (SPA) is only RM10 per copy.
Loan agreement, as an important legal document, is also liable for stamp duty at a flat rate of 0.5% of the full value of the loan.
For Malaysians first time homebuyers only, full stamp duty exemption is offered on both the instrument of transfer and loan agreement for properties valued up to RM500,000. This applies to any Sale and Purchase Agreement completed between 1 January 2021 and 31 December 2025
However, first time homebuyers who purchase a home above RM500,001 will not enjoy any stamp duty exemption from 2024 onwards.
As announced in Budget 2024, for foreigners (non-citizens and foreign-owned companies, excluding Malaysian permanent residents), a flat rate stamp duty of 4% will be imposed on the instrument of transfer of property, effective 1 January 2024.
For real estate transfer documents between loved ones, a fixed stamp duty fee of RM10 will be introduced to replace the previous variable rate. This change will apply to cases where beneficiaries are relinquishing their rights to eligible beneficiaries by a will, Faraid, or the Distribution Act 1958.
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Recognising the Value of Stamp Duty
Hopefully, a little look at the history helps you understand the value of stamp duty for property. We might sometimes wish we didn’t have to pay for it, but it’s valuable for the nation.
Stamp duty is an important part of government revenue in Malaysia. It’s estimated to have generated RM8.04 billion for the government in 2022, reflecting 3.85% of total taxation revenue.
In line with better property market outlook.The revenue from direct tax comprising stamp duty is expected to register RM8.4 billion and RM8.6 billion in 2023 and 2024 respectively.
That’s nothing to frown at when you consider all the public services, infrastructure, financial support and relief that these tax revenues go towards providing.
We might not like paying it, but at least we can appreciate why we do. Just remember, good financial planning is as important for you as it is for the government.
Always do your research to understand what stamp duty obligations you might incur on your property deal.
Disclaimer: The information is provided for general information only. PropertyGuru International (Malaysia) Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.