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Stamp duty exemption for the restructuring or rescheduling of a business loan or financing
The Stamp Duty (Exemption) (No. 2) Order 2020 and Stamp Duty (Exemption) (No. 2) 2020 (Amendment) Order 2021, gazetted on 21 May 2020 and 25 January 2021 respectively, provide a stamp duty exemption on the instrument of loan or financing agreement relating to the restructuring or rescheduling of a loan or financing between a borrower or customer and an FI, which is executed between 1 March 2020 and 30 June 2021 (see Special Tax Alert No. 15/2020 and Tax Alert No. 3/2021).
Following the above, the Stamp Duty (Exemption) (No. 11) Order 2021 [P.U.(A) 367] was gazetted on 15 September 2021. The Order provides that the exemption will also apply to the above-mentioned instruments of loan or financing agreements executed between 1 July 2021 and 31 December 2021.
The exemption is subject to the following conditions:
• The existing instrument of loan or financing agreement has been duly stamped under Item 22 or 27 of the First Schedule of the Stamp Act 1949, and
• The instrument of loan or financing agreement relating to the restructuring or rescheduling of a loan or financing does not contain the element of additional value to the original amount of loan or financing under the existing instrument of loan or financing agreement*
*Any interest or profit accrued from the restructured or rescheduled payments is not considered to be an element of “additional value”
The exemption is not automatic and must be applied for. The application for the exemption will have to be accompanied by the relevant documents relating to the restructuring or rescheduling of that loan or financing.
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
(b) Restructuring or rescheduling
Any modification made to the existing repayment terms and conditions of the loan or financing agreement pursuant to a concession provided by the FI due to the inability of the borrower or customer to comply with the existing repayment schedule consequent to deteriorating financial conditions.
The Order is deemed to have come into operation on 1 July 2021.