Proposed amendments in the Finance Bill 2024 will grant the Inland Revenue Board (IRB) the authority to review all agreements and levy stamp duty. Currently, stamp duty is generally not a concern unless there's a property transfer requiring title transfer or transactions between third parties potentially leading to litigation. Documents lacking a stamp are inadmissible in court. Taxpayers are not obligated to stamp documents.
Typically, intercompany agreements between related parties go unstamped as disputes requiring court intervention are unlikely. However, this practice will cease from 2026 with the proposed amendments. The IRB will have the right to review all agreements and collect stamp duty. Stamp duty is a unique tax applied to agreements classified as instruments, encompassing any document in handwritten, typewritten, printed, or electronically recorded/transmitted form, including agreements, letters, memorandums, and emails. Stamp duty liability arises only if the instrument is listed in the First Schedule of the Stamp Act 1949, with tax rates specified for each item. A common taxpayer error is applying the incorrect duty due to improper instrument classification. Many taxpayers struggle to interpret this legislation, enacted during the pre-independence era in a legalistic manner. The most significant change is the phased introduction of self-assessment starting January 1, 2026, for instruments related to rental/lease, general stamping, and securities. Phase 2 in 2027 will apply to property ownership transfer instruments, and Phase 3 in January 2028 will encompass all other instruments