The Inland Revenue Board of Malaysia has issued a Guidelines on the Stamping of Share Transfer Instruments for Shares that are not quoted on the Kuala Lumpur Stock Exchange on 23 June 2020 to replace/cancel the guidelines issued on 6 November 2019.

The basis of valuation of the shares has been updated, including the removal of the par value to be in line with the provisions in the Companies Act 2016 and the Price Earning Ratio (PER), as the Price Earning Multiple value which was used for computing the PER is no longer valid.

The shares can now be valued based on one of the two following methods:

1. Net tangible assets (NTA) (Total Assets – Intangible Assets – Total Liabilities)
2. Consideration (Market Value)

Table below shows the methods applicable in different categories of companies:

Category of Companies	Value of Shares subject to Stamp Duty
Transfer of shares that requires the approval of Securities Commission	Price/value as approved by the Securities Commission
Profit-making or loss-making companies	The highest of NTA and consideration
Newly incorporated companies	Consideration
Inactive companies: ·  Dormant companies ·  Zero-revenue companies ·  Threshold-qualified companies	Consideration

Form of Transfer of Securities is required to be submitted to the stamp office (Inland Revenue Board) for adjudication of stamp duty within 30 days of the date of execution if executed in Malaysia or 30 days after it was received in Malaysia if executed outside Malaysia.

The latest audited accounts of the company of not less than 18 months must be submitted together with the Form of Transfer of Securities during the application for adjudication. However, companies that meet the qualifying criteria for audit exemption pursuant to the Practice Directive 3/2017 issued by the Companies Commission of Malaysia are exempted from this requirement. The categories of companies that would qualify for the audit exemption are:

1. Dormant companies;
2. Zero-revenue companies; and
3. Threshold-qualified companies

Illutration:

ABC Sdn Bhd (the Company) is a private company registered in Malaysia with a capital of RM100,000, divided into 100,000 ordinary shares. The Company has NTA of RM1,000,000 and profit as at the end of last year. The Company is not an inactive company.

Mr. A, who holds 50,000 shares, representing 50% of equity holding in ABC Sdn Bhd, intends to transfer all his shareholdings in the Company to Mr. B for RM50,000. The amount of total stamp duty payable is calculated as follows.

The calculation of the share’s value will be as follows:

1. Based on NTA	= NTA / Number of Issued Share x Number of Share Transferred = RM1,000,000 / 100,000 x 50,000 = RM500,000 (higher)
2. Based on total consideration	= RM50,000

As the share’s value based on NTA is higher than that based on total consideration, the total stamp duty payable shall be as follows:

Stamp duty payable

= RM500,000 x 0.3% = RM1,500

Kaizen, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professionals in Kaizen for further clarification.