Under Malaysia’s most recent revisions to the Stamp Act 1949, stamp duty on loan agreements depends on whether the loan is secured and repayment term structure.
In practice, the common applicable rate can range from 0.5% to 1%, while certain unsecured loans enjoy stamp duty remission.
As this could mean significant savings for businesses entering loan agreements, this guide helps clarify the legal position of stamp duties as of January 2026.
How stamp duty is calculated
Below are the applicable stamp duty rates for different types of loan agreements under the Stamp Act 1949.
The distinction often lies in whether the loan has security, a definite repayment timeline, and the repayment manner.
| Type of Loan Agreement | Stamp Duty Rate |
| Loan without security, where repayment period is indefinite (Item 22(1)(b) of First Schedule) | 1% |
| Loan without security, where repayment period is indefinite but repayable on demand or in a single bullet repayment (Item 22(1)(b), remitted under the Stamp Duty (Remission) (No.2) Order) | 0.1%* *Note: The rate applies to the original stamp duty, not the loan amount. See Ann Joo’s case below. |
| Loan without security, for a definite and certain period where the repayment amount is ascertainable (Item 22(1)(a) of First Schedule) | 0.5%* *Note: Subject to classification of the instrument under Item 27(a) of the First Schedule |
| Loan with security to SMEs (e.g. charge, pledge, assignment of assets as collateral, or other instruments creating enforceable rights) (Item 27(a)(i) of First Schedule) | First RM250,000: 0.05% Next RM750,000: 0.25% Amounts exceeding RM1,000,000: 0.5% |
| Loan with security in foreign currency (Item 27(a)(ii) of First Schedule) | 0.5% |
| Any other instruments with security (Item 27(a)(iii) of First Schedule) | 0.5% |
The most common type of loan agreement has a definite repayment period and creates enforceable rights over assets or receivables, thus attracting ad valorem stamp duty at 0.5%.
Remission requirements
Section 2 of the Stamp Duty (Remission) (No. 2) Order 2012 (“Remission Order”) states:
“The amount of stamp duty that is chargeable under subsubitem 22(1)(b) of the First Schedule to the Act upon a loan agreement or loan instrument without security for any sum or sums of money repayable on demand or in single bullet repayment under that subsubitem which is in excess of zero point one per cent (0.1%) is remitted”
In short, the Remission Order applies where the following four conditions are met:
- stamp duty is chargeable under Item 22(1)(b) of the First Schedule
- the instrument is a loan agreement
- the loan is unsecured
- the amount is repayable on demand or in a single lump sum repayment
This remission is particularly relevant for high-value loans / facilities, illustrated in the Court of Appeal decision below which clarified that the 0.1% rate applies to the duty amount before remission, not the principal loan amount.
Collector of Stamp Duty v. Ann Joo Integrated Steel Sdn Bhd (Court of Appeal, 13 November 2024)
This case concerned the correct stamp duty treatment of a Letter of Offer for trade credit facilities amounting to RM105 million and whether the instrument qualified for remission under the Remission Order.
LHDN assessed a stamp duty of RM525,000, treating the instrument as a loan for a definite and certain period under Item 22(1)(a) of the First Schedule (0.5% stamp duty rate), calculated as:
Stamp duty before remission: RM105,000,000 × 0.5% = RM525,000
The Court of Appeal upheld the High Court’s decision that the facilities did not have a definite repayment period, as the bank retained the right to recall or cancel the facility at any time. Consequently, the instrument fell within Item 22(1)(b).
The Remission Order therefore applied, and LHDN was required to refund the excess stamp duty.
The Court of Appeal also clarified the computation of remission:
Step 1: Duty before remission under Item 22(1)(b): RM105,000,000 × 1% = RM1,050,000
Step 2: Duty after remission: RM1,050,000 × 0.1% = RM1,050 (final payable duty)
This decision highlights the importance of repayment structure and recall rights in determining whether a loan is treated as having a definite or indefinite duration for stamp duty purposes.
As this is a Court of Appeal decision, it represents the prevailing appellate position, subject to any further appeal to the Federal Court.
Takeaways
In light of the move towards self-assessment of stamp duty from 2026, it is increasingly important for businesses to identify potential stamp duty costs early in a transaction, as taxpayers will bear primary responsibility for accuracy and compliance.
