New: Stamp Duty Treatment for Construction Contracts

The Ministry of Finance has announced through its website www.treasury.gov.my that the Ministry has reviewed the imposition of ad valorem stamp duty on construction contracts in view of multi tiered contracts practiced in the industry.

In accordance with Section 80(2) of the stamp Act 1949, the Ministry has agreed that ad valorem duty is only imposed on the contracts between the client and the main contractor. All other subsequent contracts are taxed at only RM50.00.

As the above takes effects on 15 July 2009, pending proper gazetting, all remittance will be given on a case-to-case basis under Section 80(1A) of the Stamp Act. The following details the announcement.


Stamp Duty for Construction Contract

Starting 1st January 2009, stamp duty for construction and service contract has been adjusted accordingly at ad valorem rate at RM5 for every RM1,000 or part of it. Ministry of Finance has reconsidered the ad valorem duty stamp related to construction as most of these project involved multi tier whereby to attain the contract for project, it has to go through various stages. All of these contracts are referred to stamp duty at ad valorem rate. Therefore, ad valorem rate is imposed twice on the same project. 

After considering this matter, the minister has agreed as follows under section 80(2), Stamp Act 1949:

1. For contracts offered by government, the first stage is the agreement between the government and the main contractor, and the stamp duty will be paid by the government. The stamp duty will be excluded from the contract. Ad Valorem duty will only be imposed at second stage, between the main contractor and sub-contractor. The contract will only be imposed a fix duty of RM50.00 only and the balance duty will be revoked.

2. For contracts offered by other than the government, ad valorem stamp duty will be imposed for the contract between the party and the main contractor at first stage. The subsequent contract will be imposed a fix duty of RM50.00 and the balance will be revoked.

3. If the contract is being cancelled by the party offering the contract and the stamp duty has been paid for the contract, only ad valorem duty will be refunded. The fix stamp duty of RM50.00 which has already been paid for the contract is not refundable.