Stamp Duty Act ruling- instead of a fixed sum for stamp duty, stamp duty now will be at % basis

on the service contract value! I thought this was one of those so called 'brilliant' ideas which will end up in the bin! Just like the idea of applying different petrol prices to different c.c. cars...but unfortunately NOT! MBAM via its circular dated 24th December 2010 stated that they have received a letter from the MoF whereby the MoF has decided that the stamp duty policy on service agreements (including construction contracts) will be applicable with effect on 1st January 2011 as follows; 1. The imposition will be at 0.1% ad-valorem on the service contract value, Don't be confused with the term ad-valorem! The phrase ad-valorem is Latin for "according to value"; 2. If the service subjected to stamp duty involves multi-tier contracts i.e. Employer-Main ContractorSubContractor, the 0.1% will be imposed at the first tier (i.e. the contract between Employer-Main Contractor); or to the second tier (i.e. the Main Contractor-SubContractor) for service agreements whereby been exempted from paying stamp duty (i.e. where the Goverment is the Employer); 3.Service Agreement at other levels (other than those where the 01.% applies) will bear a stamp duty fixed at a flat rate of RM50.00; 4.If a service agreemnt been cancelled by the Employer (or the party awarding the contract) and stamp duty of 0.1% has been paid, such 0.1% is returnable. However those stamp duty at other levels (i.e. the RM50.00 flat rate) will not be returned. Do read the circular by MBAM here: http://www.mbam.org.my/mbam/doc/news/[20101224]%20Circular%20on%20Update%20for%20St amp%20Duty%20Act%20Ruling.pdf Should you have any queries about the ruling, you can email directly to MBAM at mbam05@mbam.org.my Now how does this affect us? In every aspect of services we engaged where contract exist! For the construction industry the immediate effect will be the increased in project prices. Just to let know of the magnitude of payable amount;

RM1,000,000,000.00 Contract Value, stamp duty payable RM1,000,000.00 RM 100,000,000.00 Contract Value, stamp duty payable RM RM RM RM 10,000,000.00 Contract Value, stamp duty payable RM 1,000,000.00 Contract Value, stamp duty payable RM 100,000.00 Contract Value, stamp duty payable RM 100,000.00 10,000.00 1,000.00 100.00

Although it appears manageable, my worry is that if this is not understood properly, subcontractors and sub-subcontractors and all lower tier levels may wrongly assume the 0.1% apply at all levels and hike their prices accordingly and the whole project price will be overblown!

Therefore the information about this Stamp Duty Ruling application need to be spreaded fast! Forums, talks, circulars etc. from governing, organisation, society etc. need to be issued out immedieately to avoid misconception. Posted by SUAZ Consultancy & Solutions at 11:18 AM 0 comments