Stamp duty on construction contract instruments

With effect from 1 January 2009, service agreement instruments including construction contracts are subject to stamp duty at the ad valorem rate of RM5 for every RM1,000 or part thereof.  In view that construction projects generally involve multiple tiers multiple levels of stamp duty at ad valorem rate are levied on the same project.  The Ministry of Finance (MOF) has reviewed the situation and in exercising his powers under Section 80(2) of the Stamp Act 1949 has agreed and issued the following guideline:

i)      For contracts awarded by the Government where the agreement is signed between the Government and the principal contractor, the contract is exempted from stamp duty.  Stamp duty at ad valorem rate will be levied on second level contracts (i.e. contracts between the principal contractor and the sub-contractors).  Stamp duty for contracts at the third and subsequent levels will be fixed at RM50.00, and any stamp duty paid in excess will be remitted.

ii)     For contracts awarded by any party other than the Government; stamp duty at ad valorem rate will be levied on the contract between such party and principal contractor.  Stamp duty for contracts at the second and subsequent levels will be fixed at RM50.00, and any stamp duty paid in excess will be remitted.

iii)      For projects that are cancelled by the parties who had offered the contracts, and stamp duty for all such contract had been paid, only the stamp duty at the ad valorem rate  will be refunded.  Stamp duty at the fixed rate of RM50.00 will not be refunded.

The remission of stamp duty is effective from 15 July 2009.  In view that the remission order cannot be gazetted immediately, approval of remission stamp duty meanwhile will be given under Section 80(1A) of Stamp Act 1949 on a case by case basis. 

Members may view the guidelines at the Institute’s website or at the MOF’s website at http://www.treasury.gov.my/index.php?option=com_content&view=category&id=83&Itemid=196&lang=my <http://pull.xmr3.com/p/21562-494044-8BDB/81865455/clickto2_gory-id=83-Itemid=196-lang=my.html>