The Stamp Duty (Exemption) (No. 18) Order 2021 [P.U.(A) 502/2021] (“E.O. 18/2021”) which exempts from stamp duty specified instruments relating to mergers or acquisitions executed by small and medium enterprises (“SMEs”) was gazetted on 31 December 2021 and is deemed to have come into operation on 1 July 2021.
E.O. 18/2021 exempts from stamp duty the following “instruments in relation to an approved merger or acquisition” executed by SMEs:
- contract or agreement for the sale or leasing of property (land, building, machinery and equipment);
- instrument of transfer and memorandum of understanding;
- loan or financing agreement; and
- first leasing agreement.
To qualify for the exemption under E.O. 18/2021:
- the instrument must be executed by SMEs within the meaning assigned to that expression under section 2 of the Small and Medium Enterprises Corporation Malaysia Act 1995 (previously known as the Small and Medium Industries Development Corporation Act 1995);
- the application for merger or acquisition must be received by the Ministry of Entrepreneur Development and Cooperatives from 1 July 2021 but no later than 30 June 2022; and
- the instrument must be executed on or after 1 July 2021 but no later than 31 December 2022.
Furthermore, the definition of SMEs can be found in the Guideline for SME Definition (updated September 2020) issued by SME Corporation Malaysia (the Secretariat to the National Entrepreneur and SME Development Council).
The exemption from stamp duty under E.O. 18/2021 is one of the measures under the 2022 Malaysia Budget and is an extension of the stamp duty exemption relating to mergers or acquisitions of SMEs under the Stamp Duty (Exemption) (No. 3) Order 2021 [P.U.(A) 73/2021] (“E.O. 3/2021”), the operation of which has now lapsed.
The objective of the exemption from stamp duty under E.O. 18/2021 and its predecessor E.O. 3/2021 is to encourage mergers and acquisitions among SMEs in Malaysia, an initiative announced by the Prime Minister of Malaysia under the Short-Term Economic Recovery Plan (June to December 2020) (PENJANA) on 5 June 2020.