If buying a new home is on your mind this year, it is critical to understand the property stamp duty and how you can get a stamp duty exemption, especially for a first-time house buyer.

In this article – Stamp duty Malaysia, we will dive deep into Stamp duty in Malaysia to better understand the Stamp duty.

WHAT IS STAMP DUTY?

According to the Inland Revenue Board Of Malaysia, Stamp duties are imposed on instruments and not transactions.

Moreover, an instrument is defined as any written document, and in general, – stamp duty is levied on legal, commercial, and financial instruments.

Furthermore, property transaction stamp duty is essentially a fee on legal documents such as the transfer and loan agreement instrument when you purchase a house.

STAMP DUTY ON INSTRUMENT OF TRANSFER

When a person buys a house, they must enter an agreement call Sale and Purchase Agreement (SPA).

The Sale and Purchase Agreement is a legally binding contract that outlines a sale between a buyer and a seller.

After all, these conditions must be mutually agreed upon between both parties, hence the term “agreement.”

The SPA protects the buyer by ensuring the seller cannot change the terms and conditions to their benefit.

Generally, during the Sale and Purchase Agreement signing, the SPA lawyer will require the Purchaser to pay stamp duty and lawyer fees.

Although a Purchaser can request to pay the stamp duty after the Inland Revenue Board notice is issued, normally it will take less than a month of submission, but we do not encourage it.

If there is any delay in paying the stamp duty, there will be a penalty charge by the Inland Revenue Board to the Purchaser.

Therefore, it is best to avoid it.

STAMP DUTY CHARGES

Now that you know everyone has to pay stamp duty when buying a house. Let us take a look at how much you need to pay the stamp duty in Malaysia.

The stamp duty in Malaysia is a tax based on different tiers as below.

PROPERTY PRICE RATES
For the first RM100,000 1%
From RM100,001 to RM500,000 2%
From RM500,001 to RM1mio 3%
The subsequent amount 4%

SOMETHING YOU SHOULD KNOW ABOUT STAMP DUTY

On occasion, if you decide to beat the stamp office by putting a lower SPA price, YOU CAN’T!

Bear in mind, before issuance of stamp duty notice, Stamp Office will check the property market value with the Valuation and Property Services Department to confirm your property market.

In any event, stamp duty is calculated based on the property valued by the Stamp duty Office or Sale and Purchase Agreement Price, whichever is higher.

If the SPA price is RM500,000 and the Property Market value is RM600,000. The stamp office will take RM600,000 as the stamp duty calculation.

STAMP DUTY CALCULATION

Now that you know the stamp duty rates in Malaysia let us do some calculations on the actual amount you will pay for the stamp duty.

For instance, Mary signed a Sale and Purchase Agreement with the purchase price of RM500,000.

So, how much Mary need to pay the stamp duty?

PROPERTY PRICE RATES AMOUNT
For the first RM100,000 1% RM100,000 X 1% = RM1000
From RM100,001 to RM500,000 2% RM400,000 X 2% = RM8000
TOTAL AMOUNT RM9000

In total, Mary needs to pay RM9000 stamp duty for the instrument of transfer or SPA.

STAMP DUTY ON A LOAN AGREEMENT

Hey, what happens if Mary requires a bank loan to finance her purchase?

If Mary requires a bank loan, she will apply for a bank loan from one of the local banks in Malaysia, and she will enter an agreement called Loan Agreement between the bank and her.

As a result, she must pay stamp duty on a loan agreement when she signs the Loan Agreement with the bank’s panel lawyer firm.

STAMP DUTY CHARGES

In contrast, the stamp duty charges for the Loan agreement are way cheaper compare to its counterparts.

The stamp duty for the loan agreement is as below.

LOAN AMOUNT RATES
Total loan amount 0.50%

In this context, the Total Loan amount will mean total financing, which includes any legal fees, valuation fees, MRTA, or any other fees finance with the loan amount.

STAMP DUTY CALCULATION

Now that you know the Loan Agreement stamp duty rates in Malaysia, let us do some calculations on the actual amount you will pay for the stamp duty.

For instance, Mary signed a Sale and Purchase Agreement with the purchase price of RM500,000, and she applies for a bank loan of RM450,000.

So, how much Mary paying for the loan agreement stamp duty?

LOAN AMOUNT RATES AMOUNT
RM450,000 0.50% RM450,000 X 0.5% = RM2250
TOTAL RM2250

Mary needs to pay RM2250 for stamp duty for the loan agreement.

In a nutshell, Mary will need to pay RM9000 for the SPA stamp duty and RM2250 loan agreement stamp duty. In total, she requires to pay RM11,500 stamp duty alone.

Stamp Duty Exemption For First-Time Buyers

Now, we reach the fun part- Stamp Duty Exemption.

Homebuyers can look forward to full stamp duty exemptions this year on the instrument of transfer and instrument of the loan agreement for the sub-sale market and new launch properties.

Want to know how? Keep reading.

We are blessed this year as the Malaysia Government decided to extend the Stamp Duty Exemption from the previous year and increase the Property Value with stamp duty exemption up to RM500,000.

The stamp duty Exemption as per the Budget 2021 announcement and further promoting homeownership, especially for first-time buyers, are below.

No. STAMP DUTY EXEMPTION 2021
1. Full Stamp Duty exemption on instruments of transfer and loan agreement for first-time homebuyers is extended until 31st December 2025.
2. The limit of stamp duty for the first residential home is also increased up to RM500,000.
3. This exemption is effective for the Sale And Purchase Agreement executed from 1st January 2021 to 31st December 2025.

Other Criteria For Stamp Duty Exemption

There are other criteria that you must oblige in applying for the stamp duty exemption.

  1. You must be a Malaysian and First-time house buyer.
  2. The residential property must not fall under a small office home office (SOHO), small office flexible office (SOFO), small office virtual office (SOVO), and service apartment.
  3. You never inherit or given as a gift for any residential property before this by an individual or joint name and have never been granted any approval of stamp duty exemption application.

Stamp Duty Exemption Calculation

In Mary’s case, from the previous example above, she bought an RM500,000 house and took a bank loan of RM450,000.

If she is a first-time house buyer and fulfills the other criteria for a stamp duty exemption, she will be exempted from paying the stamp duty.

Stamp Duty For SPA

PROPERTY PRICE RATES AMOUNT
For the first RM100,000 1% RM100,000 X 1% = RM1000
From RM100,001 to RM500,000 2% RM400,000 X 2% = RM8000
TOTAL AMOUNT RM9000
After Stamp Duty Exemption RM0

Stamp Duty For Loan Agreement

LOAN AMOUNT RATES AMOUNT
RM450,000 0.50% RM450,000 X 0.5% = RM2250
TOTAL RM2250
After Stamp Duty Exemption RM0

MISTAKES THAT SOME PEOPLE DO

You need to apply for Stamp Duty Exemption; thereupon, you need to fill up a form and submit the application to the stamp office.

In the case there is no application, there is no stamp duty exemption.

Normally, you can request the Sale and Purchase Lawyer to fill-up the form for you and submit it to the Stamp Office.

And it is important to remind your Sale and Purchase Lawyer to do so because if you miss the train, you will not get the stamp duty exemption.

Nevertheless, some people like to assume their “SPA lawyer will know what to do” attitude.

Please DON’T.

Your SPA Lawyer is a law firm that might be handling hundreds of files per month and sometimes they might also assume you are a second house buyer that does not require stamp duty exemption.

In the case of assumption, you assume THIS. And they assume THAT.

Unfortunately, it will end up everyone forgets to do their parts. Eventually, the SAD part is it will cost you dearly for the lesson.

On the bright side, the best way is always to remind each other and work hand in hand with your lawyer.

CONCLUSION

  1. You need to pay Stamp duty for SPA and Loan agreements when buying a house.
  2. There are 4 tiers of Stamp duty rates. The higher the house price, the more expensive the stamp duty.
  3. The Loan Agreement stamp duty is only 0.50% of the total loan amount.
  4. You can get a Stamp Duty Exemption if you are a first-time house buyer.

That concludes our article today – Stamp Duty In Malaysia

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