Stamp Duty On Asset Transfer Agreement

April 12, 2021

The BS Act follows a system similar to that of the IS Act, with Article 5 of its list imposing stamp duty on an instrument that is an “agreement or its records or memorandum of agreement”. It should be noted that Article 5, point h), point (a) (iv) explicitly contains an agreement which: a) creates any obligation, right or interest; b) has a monetary value; and (c) is not part of any other provision of the BS Act. Stamp duty of 0.5% on the value of services/loans. However, stamp duty can be paid more than 0.1% for the following instruments: in general, the transfer of real estate can give rise to a significant stamp duty: the law on stamps does not define BTA and does not set explicit provisions on the collection of stamp duty on a BTA. It is therefore useful to identify any assets to be transferred through the BTA. In this context, it is necessary to analyze the provisions of the stamp law that will have an impact in the event of a BTA. Accordingly, under the Stamp Act, a business transfer contract that does not prove a transfer of ownership is considered a sales contract within the meaning of Section 5, point c). Ringgit Malaysia loan contracts are generally taxed with a stamp duty of 0.5%. The penalty for delayed stamps varies depending on the delay period.

The maximum fine is RM100 or 20% of the duty obligation, depending on the highest amount. When you buy a business, the business transfer agreement can be provided (usually called the Business Asset Transfer Agreement): BTA usually includes many transfer positions that can encompass all types of tangible, intangible, personal and real estate. While a break and enter from an income tax perspective is the preferred method of acquiring the business, it is recommended, given the complexity of the stamp duty on the transmission instrument, to go to the appropriate authority [see final note 9] and to obtain the opinion of the district official as to the determination of the tax levied on the instrument in case of ambiguity. It is always necessary and advantageous for the parties to deal very carefully with the aspects of stamp duty in order to avoid penalties of up to ten times the stamp duty actually owed. Section 2 (42C) of the Income Tax Act of 1961 recognizes “Slump-Sale” as a transfer of a “business,” that is, a party or entity or a division of businesses constituting a business activity when it is considered a whole. In other words, Slump Sale means transferring the entire business for a single plan, without assigning value to individual assets and liabilities. In the context of the break and enter, the business is sold on a “current interest basis” – the transfer of all assets/liabilities, contracts, employees, etc., so that the company can operate as before the sale. Exemption of stamp duty on all instruments related to the acquisition of real estate by a financier for rental purposes in accordance with the principles of Syariah or an instrument by which the financier assumes the contractual obligations of a client in the context of a main sale and sale contract.

Here it is important to note that the sale can be done in two ways, one is a business sale and the other is a sale of assets. The type of sale determines which positions of the company should be part of the transfer of ownership. A buyer benefits from a sale of assets by making use of the amortization benefits at an early stage and avoiding the acquisition of the liabilities of the former business. However, from a seller`s perspective, the sale of a business is preferable to pay taxes at a low long-term capital rate compared to the higher normal tax rate applicable to the sale of assets.

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