Senate passes Finance Bill: Stamp Act and Labuan Business Activity Tax Act among legislation affected

19 December 2023

On 13 December 2023, the Finance Bill (No. 2) 2023 (“Bill”) was passed by the Senate (Dewan Negara) and gazetted on 29 December 2023. The Bill contains a total of 97 amendments to various legislation, including but not limited to, the Income Tax Act 1967, Real Estate Gains Tax Act 1976, Stamp Act 1949 and Labuan Business Activity Tax Act 1990.

This article discusses some of the amendments that will be made to the Stamp Act 1949 and the Labuan Business Activity Tax Act 1990.

Proposed amendments to Stamp Act 1949

Currently, adhesive stamps and postal franking machines for impressed stamps may be used. The Stamp Act 1949 will be amended to remove references to the aforesaid due to the discontinuation of adhesive stamps and both digital and postal franking machines.

The amendments include:

• a new definition of “writing” or “written” which will include “electronic record or transmission which is in an electronically readable form”; and

• a new section 42(2A) which provides that “For the purposes of subsection (2), where the instrument is received by way of electronic transmission, the date of receipt thereof shall be verified by the production of a copy or print out of the electronic transmission”.

In respect of instruments executed outside of Malaysia and received by way of electronic transmission, the Stamp Act 1949 will be amended to provide that “instruments” would specifically include instruments that subsist in electronic form and proof of receipt in Malaysia would be expanded to include the receipt by way of electronic transmission, i.e. such instruments would be subject to stamping within 30 days after it has been received via electronic transmission.

The Stamp Act 1949 will also be amended to abolish the maximum limit of RM2,000 for foreign currency loans and financing agreements. Currently, the First Schedule of the Stamp Act 1949 provides that, where the loan is a foreign currency loan or the financing was made in accordance with Shariah principles in currencies other than Ringgit Malaysia, the stamp duty payable is chargeable at a rate of RM5 for every RM1,000 or part thereof, but the total duty payable will not exceed RM2,000. The Stamp Act 1949 will be amended to remove the maximum limit of RM2,000 whereby stamp duty payable would then be the same as Ringgit Malaysia loans which is generally subject to a rate of 0.5% (i.e. based on RM5 for every RM1,000 or part thereof).

The amendments relating to the Stamp Act 1949 came into effect on 1 January 2024.

Labuan Business Activity Tax Act 1990

When the amendments in the Bill come into force, Domestic Top-Up Tax and Multinational Top-Up Tax and the GloBE Rules in the new Part XI of the Income Tax Act 1967 shall apply to Labuan entities which are members of a multinational enterprise group with an annual revenue of €750,000,000 or more in the consolidated financial statements of the ultimate parent entity in at least two of the four consecutive financial years immediately preceding the tested financial year.

The amendments relating to the Labuan Business Activity Tax Act 1990 are expected to come into effect for the financial year beginning 1 January 2025 and subsequent financial years.