Stamp duty is a tax on legal documents and is divided into two categories. We cover the tiers, how to calculate it, stamp duty exemption for first-time homebuyers, as well as updates to stamp duty for 2021.

Stamp duty is an important consideration in all real estate transactions. In any property purchase or transfer, it’s vital to properly assess all costs involved.

That’s not always an easy task however, so here’s a handy guide from us on what stamp duty is all about.

What Is Stamp Duty? 

Stamp duty is a essentially a fee on legal documents such as the instrument of transfer and loan agreement when you purchase a house. 

First off, you need to know that it's divided into two categories:

• Fixed Duties are charged at a set price, and include stamps for individual policies or copies.



• Ad Valorem Duties are variable costs based on the value of a transaction that legal documents represent. These include taxes such as those based on the value of a property transfer or loan agreement.

What this basically means is, stamp duty is applicable at a fixed tier for the instrument of transfer (Fixed Duties) AND on a variable cost, depending on the value on the loan agreement (Ad Valorem Duties).

Stamp Duty On Instrument of Transfer

Stamp duty is a tax based on specific tiers, with its own percentage for each level. The tiers are as follows (with effect from 2019):

• 1% on the first RM100,000 of the property price



• 2% charge from RM100,001 to RM500,000



• 3% charge from RM500,001 to RM1 million



• 4% charge for everything above RM1 million

Stay with us! Now, what does that mean in practice? Let’s explore a simplified example. A property valued at RM500,000 today would be liable for charges across the first two tiers that we mentioned above.

Stamp duty would be charged according to 1% on RM100,000 of value and 2% on RM400,000 of value. So what will the stamp duty be?

• RM1,000 stamp duty owed on the first RM100,000 value (1% x RM100,000)



• RM8,000 stamp duty owed on the next RM400,000 value (2% x RM400,000)



• Thus, RM1,000 + RM8,000 = RM9,000 stamp duty owed in total

If that all sounds complicated, don’t worry, a quick Google Search for stamp duty calculators will lead you right to a nifty tool to do the number crunching for you!

Stamp Duty On A Loan Agreement

It’s also important to factor in the stamp duty owed for any loan agreement which may be entered into as part of a property purchase.

As an important legal document, the loan agreement is also liable for stamp duty. Stamp duty on a loan agreement is a flat 0.5% rate, applied to the full value of the loan.

So, for a property priced at RM500,000, you would typically apply for a 90% loan (RM450,000) - as 10% of the property price will be for the downpayment, which you would need to fork out yourself. 

100% loan is possible, but uncommon for most people.

Thus, if you take out a loan of RM450,000 to cover your hypothetical property purchase above, you’re liable for a stamp duty of RM2,250 on that loan (0.5% x RM450,000).

Let’s go through this step-by-step. For your hypothetical property worth RM500,000, this is how you calculate your total stamp duty for the instrument of transfer AND loan agreement:

Stamp duty for instrument of transfer + Stamp duty on loan agreement = Total stamp duty to be paid

[(First RM100,000 x 1%) + (Next RM400,000 x 2%)] + 0.5% of loan amount (RM450,000)
= (RM1,000 + RM8,000) + (0.5% x RM450,000)
= RM9,000 + RM2,250
= RM11,250

Budget 2021 Stamp Duty Exemption For First-Time Buyers

Announced changes to stamp duty in Malaysia mean that first-time buyers are now exempt from certain stamp duty charges.

This exemption was confirmed in Budget 2021 put forward by the Malaysian Government on 6 November 2020. 

Full stamp duty exemption will be given to both instrument of transfer and loan agreement for the purchase of a first home worth not more than RM500,000. This exemption will be for the Sale and Purchase Agreement completed between January 2021 to 31 December 2025.

Yup, that means it's full exemption for the stamp duty on both instrument of transfer and loan agreement if your property price is RM500,000 and below!

That's a maximum of RM11,250 savings!

HOC 2020/2021 Stamp Duty Exemption

With the COVID-19 pandemic hitting Malaysian shores and bringing about the Movement Control Order (MCO), our economy suffered a major blow as a result.

In order to help stimulate the economy once more and help the people where possible, Prime Minister Tan Sri Muhyiddin Yassin announced the Short-Term Economic Recovery Plan (PENJANA) on 5 June 2020.

In it, were two notable mentions of a stamp duty exemption, under the reintroduced Home Ownership Campaign (HOC) taking effect from June 2020:

1. Instruments of transfer and loan agreement for the purchase of residential homes priced between RM300,000 to RM2.5 million will enjoy a stamp duty exemption. This is subject to a minimum 10% discount by the developer, and an exemption on the instrument of transfer is limited to the first RM1 million of the property price.



2. A full stamp duty exemption is given on loan agreement effective for Sales and Purchase Agreements (SPA) signed between 1 June 2020 to 31 May 2021.

_{This article was contributed by PropertyGuru.}