Stamp Duty on Debenture Subscription Agreement: A Guide for Financial Institutions

Debenture subscription agreements are an important tool for raising capital for businesses of all sizes. They provide a way for companies to issue debentures, which are a popular type of debt instrument, to investors in exchange for cash. However, before a debenture subscription agreement can be executed, it is important to consider the stamp duty implications.

What is Stamp Duty?

Stamp duty is a tax levied by the government on various types of legal transactions. In the context of debenture subscription agreements, stamp duty is payable on the issuance of debentures. The amount of stamp duty that is payable depends on the value of the debentures and the applicable stamp duty rate.

Stamp Duty Rates

In Malaysia, the stamp duty rate for debenture subscription agreements is 0.3% of the total value of the debentures. However, if the debenture is secured by a mortgage or charge over property, the stamp duty rate increases to 1% of the total value of the debentures.

Stamp Duty Calculation

To calculate the stamp duty payable on a debenture subscription agreement, you need to consider the following factors:

1. The total value of the debentures issued

2. The applicable stamp duty rate (0.3% or 1%)

For example, if a company issues RM1 million worth of debentures without any security, the stamp duty payable would be RM3,000 (0.3% x RM1 million). However, if the debentures are secured by a mortgage over property, the stamp duty payable would increase to RM10,000 (1% x RM1 million).

Stamp Duty Payment and Compliance

It is important to note that stamp duty must be paid within 30 days from the execution date of the debenture subscription agreement. Failure to pay the stamp duty within the stipulated timeframe may result in penalties and fines.

Financial institutions involved in debenture subscription agreements must ensure compliance with stamp duty regulations to avoid any legal repercussions. It is recommended to engage a professional tax consultant or legal advisor to assist with stamp duty calculations and compliance.

Conclusion

Debenture subscription agreements are an effective tool for businesses to raise capital. However, stamp duty implications should be taken into consideration to ensure compliance and avoid penalties. Financial institutions should seek professional assistance to accurately calculate the stamp duty payable and ensure compliance with regulations.