A Commentary On The 50% Stamp Duty Exemption On Loan Agreements
In the recent Malaysian Budget 2009 announcement, one of the items touching conveyancing transactions is the 50% stamp duty exemption on loan agreements for medium cost houses of up to RM250,000.00. This is an extension to the existing provision of the 50% stamp duty exemption on the instrument of transfer. To the lay person, what does this mean and how much money are we talking about with this exemption?
A little background on how stamp duty is derived would be necessary at this stage. For a transfer of an immovable property worth RM250,000.00, the stamp duty payable would be 1% on the first RM100,000.00 and 2% on the balance. Therefore, the full stamp duty payable on the instrument of transfer would be RM4,000.00. With the 50% stamp duty exemption, the purchaser saves RM2,000.00 if the value of the transaction is RM250,000.00. For obvious reasons, the amount saved is reduced proportionately if the value of the transaction is lesser than RM250,000.00.
For Loan Agreements, the stamp duty payable is RM5.00 for every RM1,000.00. Therefore, where the loan is RM250,000.00, the stamp duty payable would be RM1,250.00. With the 50% stamp duty exemption, the borrower gets a savings of RM625.00. Again, if the loan amount is lesser, the savings would naturally be lesser and in proportion. But then again, how many people out there will actually benefit from these savings?
Many loan packages for the purchase of immovable properties offered by financial institutions today come with free legal fees (and disbursements). Refinancing packages also offer zero moving costs as the financial institutions absorb the legal fees and disbursements on behalf of the borrower. Of course, the financial institutions make up for their initial costs in funding the legal fees and disbursements by earning through the interests chargeable on the loan throughout the loan tenure. With this Budget 2009 announcement, in reality, not all borrowers will benefit directly from the 50% stamp duty exemption accorded to loan agreements for loans up to RM250,000.00. It would seem like the financial institutions are the ones who benefit the most from this 50% stamp duty exemption.
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One Response to “A Commentary On The 50% Stamp Duty Exemption On Loan Agreements”
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Oh…guess you are right.
Sigh, guess it’s too much to ask the financial institutions to pass on some savings to the consumer?