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Increase in stamp duty to hit property buyers

05/06/2009 The Star By TEH ENG HOCK

KUALA LUMPUR: Those buying and renovating their properties will have to fork out more following an increase in stamp duties.

Master Builders Association Malaysia (MBAM) president Ng Kee Leen said the extra costs incurred would eventually be passed down to the end-consumers.

The amendment of the First Schedule of the Stamp Act 1949 came into effect on Jan 1 this year, where it stated that all “bonds, covenant, loan, services, equipment lease agreement of any kind whatsover” are chargeable with duty at the rate of RM5 for every RM1,000, or part thereof - which is effectively 0.5% of the contract value.

Prior to the amendment, the stamp duty chargeable on a normal service agreement without security was fixed at RM10.

“With the amendment, a RM10mil construction contract will now attract an ad valorem duty of RM50,000, while previously, it was only a nominal duty of RM10 per document regardless of the contract amount,” he said.

He called on the Government to revert to the previous system, and said he would raise this matter in a dialogue with the Finance Ministry on June 11.

“Regardless of whether the contracts are Government or private, the ultimate cost is passed back to the Government and the people,” he told a press conference.

Ng said that although the amendment came into effect in January, contractors were paying the nominal RM10 for the first three months of the year as the government agencies took some time to switch to the new system.

“But since then, many had no choice but to pay according to the new amount. This creates a cash flow problem for our members. If they don’t pay, then they cannot go ahead with their projects,” he said.

MBAM honorary tax adviser Yee Wing Peng said in addition to the increased stamping fee, members were already paying a Construction Industry Development Board (CIDB) levy of 0.125% on a construction contract, and 5% service tax on professional services such as project management, architectural, surveyance and engineering consultancy.

“The construction industry is multi-tiered, meaning there will be multiple levels of sub-contracting works.

The combined effect of stamping all agreements including sub-contracting and outsourcing at 0.5% of the contract value is exponential,” he said.


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