The Stamp Duty Act 1949.

In line with the provisions under section 80(2), Stamp Duty Act 1949, the YB Minister of Finance has decided that the stamp duty policy on service agreements (including construction contracts) will be as follows:-

i. All service agreements signed with effect from 1st January 2011 will be imposed stamp duty at 0.1% ad-valorem on the service contract value;

ii. If the service involves multi-tier, the said service agreement will be imposed stamp duty at 0.1% ad-valorem at one level only. The stamp duty at 0.1% ad-valorem will be imposed either at:

a. First tier for service agreements signed between a private entity with the service provider.

OR

b. Second tier for service agreements signed between an entity which have been exempted from paying the stamp duty (e.g. The Government of Malaysia) with the service provider.

Service agreements signed at other levels will be imposed a flat rate RM50.00 stamp duty.

In summary the above means as follows:-

1. Private Contracts

First tier (Client & Main Contractor) – ad-valorem stamp duty (0.1% of contract value).

Second tier onwards– stamp duty at RM50.00 flat rate.

2. Government Contracts

First tier (Government & Main Contractor) – exempted from paying stamp duty.

Second tier (Main Contractor & Sub Contractor) – ad-valorem stamp duty (0.1% of contract value).

Third tier onwards – stamp duty at RM50.00 flat rate.

iii. In the event the service agreement is cancelled by the party which offers the contract and the stamp duty has been paid up for all the related service agreements, only the stamp duty of 0.1% ad-valorem will be returned. Whilst the RM50.00 flat rate stamp duty paid on the other service agreements will not be returned.