(TAX UPDATE) LHDN Just Issued a Rulebook on Stamp Duty. Here Is What Every Business Owner Needs to Know.

(TAX UPDATE) LHDN Just Issued a Rulebook on Stamp Duty. Here Is What Every Business Owner Needs to Know.

Introduction

You signed a tenancy agreement last month. Your lawyer stamped it, you paid the duty, and you moved on with running your business. Simple enough, or so you thought.

But stamp duty in Malaysia is not one rule. It is a patchwork of rates spread across dozens of items in the First Schedule of the Stamp Act 1949, and the classification depends on what the document actually does, not what you call it. Get the classification wrong, and you either overpay or expose yourself to a penalty when LHDN reassesses the instrument later.

On 30 June 2026, LHDN issued a new guideline, Garis Panduan Pengenaan Duti Setem Bagi Surat Cara Yang Tertakluk Kepada Jadual Pertama Akta Setem 1949 (reference LHDN.AG.600-1/10/3). It consolidates how the Collector of Stamp Duties treats seven broad categories of instruments. If you run an SME, sign leases, transfer shares, buy or sell a business, or take on financing, this guideline touches you directly.

Here is the breakdown.

The golden rule has not changed

Duty is determined based on the content and legal effect of the document, not on its name. A document titled "Letter of Undertaking" that actually functions as a security instrument will be stamped as a security instrument. Naming a document cleverly does not change the duty outcome.

All instruments listed in the First Schedule must be submitted to the Collector via the e-Duti Setem system in MyTax, under Section 35A of the Stamp Act 1949 (SA 1949).

Part A: Tenancy and lease agreements

Section 2 of SA 1949 defines a lease broadly. It covers any written undertaking to occupy, cultivate, or pay rent on immovable property, and any instrument that grants a profit derived from land.

A tenancy agreement refers to a lease term of three years or less. Anything exceeding three years must be executed together with Form 15A under the National Land Code and registered with the Land and Mines Office.

Duty under item 49(a) runs on a sliding scale based on annual rent or average annual consideration, and the lease period:

  • Up to 1 year: RM1.00 per RM250 or part thereof

  • Over 1 to 3 years: RM3.00

  • Over 3 to 5 years: RM5.00

  • Over 5 years: RM7.00

A premium or fine paid as a lump sum for the lease is duty separately under item 49(b), computed like a conveyance under item 32(a). If both rent and premium apply, the two duties are added together under item 49(c).

The person liable to pay is the tenant or lessee for the principal agreement, and the landlord for any duplicate copy.

Part B: Transfer of shares in unlisted companies

If you are restructuring shareholding in a Sdn Bhd, this section matters. Duty under item 32(b) is RM3.00 for every RM1,000 or fractional part, computed on the price or value of the shares on the date of transfer, whichever is greater.

For ordinary shares, the value is taken as the higher of Net Tangible Asset (NTA) or consideration. The formula is straightforward:

NTA = Total Assets minus Intangible Assets minus Total Liabilities NTA per share = NTA divided by total shares issued

For preference shares, value is nominal value plus premium, or consideration, whichever applies. The guideline sets out five categories depending on company condition: sales requiring Securities Commission approval, loss making companies, profitable companies, newly incorporated companies, and dormant companies. Each has a different basis for computing the taxable value.

The purchaser or transferee bears the duty.

Part C: Transfer of real property

Item 32 imposes ad valorem duty on any instrument that has the effect of transferring, assigning, or disposing of property or an interest in property, whether legal or beneficial.

The standard rate under item 32(a):

  • First RM100,000: RM1.00 per RM100

  • Above RM100,000 to RM500,000: RM2.00 per RM100

  • Above RM500,000 to RM1,000,000: RM3.00 per RM100

  • Above RM1,000,000: RM4.00 per RM100

Two special rates apply where the transferee is a foreign company or a non citizen who is not a Malaysian permanent resident:

  • Under item 32(aa), a general property transfer to such a party attracts RM4.00 per RM100.

  • Under item 32(ab), effective 1 January 2026, a residential property transfer to such a party attracts RM8.00 per RM100. This is worth flagging for clients dealing with foreign buyers, since the rate essentially doubled for residential property specifically.

Where beneficial interest has already been stamped at ad valorem rates, the subsequent instrument transferring legal interest, such as registration of title, is stamped at a flat RM10.00 under item 32(i).

Part D: Sale or transfer of a business

This part covers the sale of a business as a going concern, whether in whole or in part, including goodwill, debts, contractual benefits, and cash at bank.

Where goodwill is not stated in the agreement, LHDN calculates it as:

Goodwill = Consideration minus (Total Assets minus Total Liabilities)

Where goodwill is stated, LHDN compares it against the formula result and takes the higher figure. Duty rates mirror the property transfer scale in item 32(a).

Part E: Transfers other than property, shares, or business

This is the catch-all for transfers of interests in property, movable or immovable, that do not fall neatly into the earlier categories. It covers assignments, and importantly, voluntary dispositions.

Under Section 16(1) and 16(3) SA 1949, a transfer made without consideration, or without adequate consideration, is treated as a voluntary disposition inter vivos and stamped as if it were a conveyance on sale. If you are structuring a gift of property between family members, this is the provision that catches it.

Life insurance policy assignments made by way of gift or trust are stamped separately under item 12(c)(i), on a fixed scale based on sum insured, ranging from RM10.00 for coverage up to RM100,000, to RM1,000.00 for coverage exceeding RM1,000,000.

Part F: Security instruments

A security instrument is any document containing a clear undertaking to pay money, repay money, or guarantee payment or repayment. It does not need to contain a charge or pledge to qualify. Facility agreements, hire purchase agreements, loan agreements, bonds, and debentures all fall here.

Duty runs across a long list of items and subitems, including items 5, 12, 20 to 25, 27, 36, 42, 45, 47, 50, 50A, 52, 60, 65, 66(b), and 78, and is generally computed on the value of the consideration or the loan amount. The party responsible for payment is typically the obligor or the person granting the security.

Part G: General stamping

Anything that does not fall within Parts A to F is stamped under the general category, typically at a flat RM10.00, regardless of the value stated in the document. This sweeps in a wide range of everyday paperwork, statutory declarations, employment agreements, guarantee letters, power of attorney under item 59(b), partnership agreements, and indemnity forms among them.

KTP's View

The value of this guideline is not that it changes the law. It does not. What it does is give practitioners and business owners a single reference point for how LHDN classifies dozens of commonly used instruments, from a hire purchase agreement to a deed of family arrangement to a simple rental of a safe deposit box.

The practical risk sits in the details that look procedural but are not. The residential property surcharge for foreign buyers under item 32(ab), effective 1 January 2026, is a good example. So is the reminder that duty follows the substance of a document and not its title.

A "Friendly Loan Agreement" is still a security instrument. A gift of property between family members without full consideration is still stamped as if it were sold.

If your business is structuring a share transfer, a business sale, or a related party property transfer in the near term, this is the moment to have the instrument reviewed before signing, not after. Getting the stamping wrong at execution stage tends to be far more expensive to fix than getting it right upfront.

This article reflects the LHDN guideline dated 30 June 2026 and is intended as general information. It is not advice on your specific transaction. Speak to a licensed tax agent before relying on it for a live matter.

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