Under Para 1, General Exemptions of the First Schedule of the Malaysian Stamp Act 1949, instruments executed by or on behalf of or in favour of the “Ruler of a State” or the “Government of Malaysia or of any State” are generally exempt from stamp duty, subject to the specific exceptions set out therein. At first glance, this sounds like a wide-ranging relief for anything government-related. But Malaysian law draws a much tighter line.
What Do The Interpretation Acts 1948 and 1967 Say?
The Interpretation Acts 1948 and 1967 define “Government” and “Federal Government” as referring only to the “Government of Malaysia” — which is essentially the federal cabinet, councils, ministries, commissions, departments, etc. Nothing more.
On the other hand, “Ruler” is defined as (a) in the case of Negeri Sembilan, the Yang di-Pertuan Besar and the Ruling Chiefs (being the Undang of Sungei Ujong, Jelebu, Johol and Rembau, and the Tunku Besar of Tampin); and (b) in the case of any State, includes any person who in accordance with the Constitution of that State exercises the functions of Ruler – which is substantially aligned with the definition of “State Authority” as expounded below.
The Interpretation Acts 1948 and 1967 define “State Authority” as the Ruler (Sultan) or Yang di-Pertua Negeri of a State (Governor) and includes, in Negeri Sembilan, the Yang di-Pertuan Besar acting on behalf of himself and the Ruling Chiefs. In essence, “Ruler” and “State Authority” refer to the same person, i.e., the Sultan or the Governor.
Practical Impact on Stamp Duty
Moral of the story: The stamp duty exemption is far narrower than its wording might suggest at first reading. It does not mean that anything “government-related” will be automatically entitled to stamp duty exemption. Always check the exact signing party’s legal status or entity and, when in doubt, before assuming that the instrument is automatically exempted for stamp duty. A small oversight can turn into an unexpected tax bill.
***
This article was written by Shawn Ho (Partner) with the assistance of Chin Wan Xin (Associate) from Donovan & Ho’s corporate practice.
Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.
