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Stamp duty exemption on the instrument of loan or financing agreement executed between an SME and a financial institution
The Stimulus Package proposals announced by the Government include the following financing facilities to assist Malaysian SMEs:
(a) All Economic Sectors Facility to improve SMEs’ access to financing and to support growth
(b) SME Automation and Digitalization Facility to incentivize SMEs to automate processes and digitalize operations to increase productivity and efficiency
(c) Agrofood Facility to increase food production for Malaysia and for export purposes
The Stamp Duty (Exemption) Order 2020, gazetted on 14 May 2020, provide a stamp duty exemption on the instrument of loan or financing agreement relating to the above-mentioned loans or financing facilities executed between an SME and a financial institution (FI). The exemption shall apply to relevant instruments executed pursuant to a letter of offer issued by the FI between 27 February 2020 and 31 December 2020 (see Special Tax Alert No. 13/2020).
Following the above, the Stamp Duty (Exemption) (No. 10) Order 2021 [P.U.(A) 364] was gazetted on 10 September 2021. The Order provides that the exemption shall also apply to relevant instruments executed pursuant to a letter of offer issued by the FI between 1 January 2021 and 31 December 2021.
The exemption is not automatic and must be applied for. The application for the exemption will have to be accompanied by the letter of offer, stipulating the approval of the loan or financing facility.
The following terms have been defined in the Order:
(a) Financial institution
Same meaning as that assigned to “banker” in Section 2 of the Stamp Act 1949, and any person prescribed as a FI by the Minister under Section 2(1) of the Central Bank of Malaysia Act 2009 (CBA) for the purposes of Section 49 of the CBA
(b) Loan or financing facility
Loan or financing facility approved under Bank Negara Malaysia (BNM)’s Fund for SMEs:
(i) All Economic Sectors Facility
(ii) Small Medium Enterprises Automation and Digitalization Facility; or
(iii) Agrofood Facility
(c) Small and medium enterprises
Enterprises as may be determined by the National Small and Medium Enterprises Development Council established under Section 2A of the Small and Medium Industries Development Corporation Act 1995
The Order is deemed to have come into operation on 1 January 2021.