Five years after the last amendments were made to the Solicitors’ Remuneration Order 2005 (“SRO 2005”) via the Solicitors’ Remuneration (Amendment) Order 2017, the Malaysian government recently repealed the SRO 2005 and replaced it with the Solicitors’ Remuneration Order 2023 (“SRO 2023”). In this article, we explain the changes brought by the SRO 2023 and discuss the recent stamp duty remission and exemption granted by the government.
Comparison between the SRO 2023 and SRO 2005
The SRO 2023 was gazetted on 12.7.2023 and came into effect on 15.7.2023. The SRO 2023 sees an increment in the rate of the scale fees on conveyancing transactions including but not limited to the sale and purchase of immovable property, financing facilities and tenancies in Peninsular Malaysia. The differences between the SRO 2005 and SRO 2023 are highlighted below:
First Schedule – Sale and Transfer
Not dissimilar to the SRO 2005, in transactions governed by the Housing Development (Control and Licensing) Act 1966 (“HDA 1966”) or any subsidiary legislation made under the HDA 1966, the scale fee under the SRO 2023 is capped based on the purchase price or adjudicated value of a property, as seen in the table below:
Second Schedule – Lease and Tenancy
Tenancy
Lease
Third Schedule – Charges, Debentures and other Security or Financing Documents
For transactions governed by the HDA 1966 or any subsidiary legislation made under the HDA 1966, the scale fee for loan transactions under the SRO 2023 is also capped. However, the scale fee depends on the amount secured or financed, as seen in the table below:
Fourth Schedule – Discharge of Charge and Deed of Reassignment
Discharge of Charge
Deed of Receipt and Reassignment
Fifth Schedule – Professional Fees for Preparing, Filing or Witnessing Miscellaneous Documents
Prior to the SRO 2005, a solicitor was not allowed to give any form of discount to any of their clients for any transaction. However, with the amendments in 2017, a solicitor is allowed to give a discount rate of up to twenty-five per cent (25 %) on the fee imposed on either Sale and Transfer transactions or Charges, Debentures and other Security or Financing Documents.
Latest Stamp Duty Updates
Although there is an increase in legal fees, the government has gazetted several remissions and exemptions to encourage first-time homeowners to purchase their first home. The new remissions and exemptions mainly apply to transactions for the purchase of properties from developers by first-time homeowners. Some of the previous remissions and exemptions are still applicable to the purchase of properties from developers as well as sub-sale transactions. The gazetted stamp duty remission and exemptions which were introduced are explained below.
Stamp Duty Remissions
For first-time home buyers, the government has introduced several stamp duty remissions to assist the buyers in their purchase, as further elucidated below:
1. Stamp Duty (Remission) (No. 2) Order 2023 [P.U.(A) 180/2023]
75% of the stamp duty chargeable on any instrument of transfer for the purchase of a residential property under the i-Miliki initiative by an individual is remitted, where the value of the property is more than RM500,000 but does not exceed RM1 million, provided that the sale and purchase agreement (“SPA”) is executed on or after 1.6.2022 and no later than 31.12.2023.
2. Stamp Duty (Remission) Order 2023 [P.U.(A) 179/2023]
75% of the stamp duty chargeable on any loan agreement to finance the purchase of a residential property under the i-Miliki Initiative by an individual is remitted, where the value of the property is more than RM500,000 but does not exceed RM1 million, provided that the loan agreement is executed between an individual named in the SPA and any of the financial institutions listed in sub-paragraphs (1)(a) to (1)(i) of Paragraph 2 of P.U.(A) 179/2023 and the SPA is executed on or after 1.6.2022 and no later than 31.12.2023.
Stamp Duty Exemptions
1. Stamp Duty (Exemption) Order 2021 [P.U.(A) 53/2021]
Stamp duty chargeable on any instrument of transfer for the purchase of a residential property by an individual is exempted, where the market value of the property is not more than RM500,000, provided that the SPA is executed on or after 1.1.2021 and no later than 31.12.2025. This exemption applies to both developer projects and sub-sale transactions.
2. Stamp Duty (Exemption) (No. 2) Order 2021 [P.U.(A) 54/2021]
Stamp duty chargeable on any loan agreement to finance the purchase of a residential property by an individual is exempted, where the value of the property is no more than RM500,000, provided that the loan agreement is executed between an individual named in the SPA and any of the financial institutions listed in sub-paragraphs (1)(a) to (1)(i) of Paragraph 2 of P.U.(A) 54/2021 and the SPA is executed on or after 1.1.2021 and no later than 31.12.2025. This exemption applies to both developer projects and sub-sale transactions.
3. Stamp Duty (Exemption) (No. 2) Order 2023 [P.U.(A) 177/2023]
Stamp duty chargeable on any instrument of transfer for the purchase of a residential property under the i-Miliki initiative by an individual is exempted, where the market value of the property is not more than RM500,000, provided that the SPA is executed on or after 1.6.2022 and no later than 31.12.2023.
4. Stamp Duty (Exemption) Order 2023 [P.U.(A) 176/2023]
Stamp duty chargeable on any loan agreement to finance the purchase of a residential property by an individual is exempted, where the value of the property is no more than RM500,000 provided that the loan agreement is executed between an individual named in the SPA and any of the financial institutions listed in sub-paragraphs (1)(a) to (1)(i) of Paragraph 2 of P.U.(A) 54/2021 and the SPA is executed on or after 1.6.2022 and no later than 31.12.2023.
5. Stamp Duty (Exemption) (No. 3) Order 2023 [P.U.(A) 178/2023]
For inter vivos (between living persons) transactions without any consideration, the government has announced that full stamp duty chargeable on any instrument of transfer will be waived provided that the transfer is made between the following parties:
It is important to note that while full exemption applies to the first RM1,000,000 of the value of the property, any sum in excess of RM1,000,000 is still subject to stamp duty but there will be a 50% waiver on such stamp duty.
On top of that, the transfer must be executed on or after 1.4.2023, and the recipient of the property must be a Malaysian citizen in order for the exemption to apply.
As for the transfer of property between spouses without any consideration, the previous P.U.(A) 420/2007 is still applicable where full waiver of stamp duty will be provided to spouses who intend to transfer their property to their spouse. Unlike the current P.U.(A) 178/2023, for P.U.(A) 420/2007, there is no cap fixed on the market value of the property.
Comparison between I-Miliki Stamp Duty Remission and Exemptions and HOC exemptions
The previous Home Ownership Campaign was introduced by the government back in 2019 with the intention of decreasing property overhang in the country and assisting purchasers in the purchase of property from developers. It was launched on 1 January 2019 and it was supposed to end on 30 June 2019. However, it was further extended till 31 December 2021. Under the Home Ownership Campaign, home buyers who purchased a residential property from a developer who participated in the campaign enjoyed the benefit of having the stamp duties either remitted or fully exempted depending on the purchase price of the property as per the table below:
All financing instruments for the purchase of property under the Home Ownership Campaign, up to the facility amount of RM2,500,000, would also be entitled to full exemption from the stamp duty imposed.
However, under the current i-Miliki initiative, a purchaser is only entitled to the stamp duty remission and/or exemption, if the purchaser is a first-time home buyer and there is a cap of RM1,000,000 imposed on the purchase price. For the purchase of any property from a developer where the purchase price exceeds RM1,000,000, full stamp duty will be imposed on the purchaser.
Conclusion
With the Solicitors’ Remuneration Order 2005, there is an increase in the legal fees to be paid to solicitors. However, the new remissions and/or exemptions introduced by the government will assist purchasers by relieving a portion of the overall costs incurred.
If you require an explanation or assistance in your conveyancing transaction, please feel free to reach out to us for a complimentary consultation and we will be pleased to assist you accordingly.
By Vinson Cheng and Marilyn Teh
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.
