Recently, the High Court in Lee Koy Eng v Pemungut
Duti Setem (and Another Appeal) [2020] 7 AMR 296 held
that Instruments of Transfer (i.e. Form 14A) executed under section
215 of the National Land Code 1965 to give effect to a renunciation
of entitlement to the estate of a person who died intestate attract
nominal stamp duty.
The deceased died intestate leaving, amongst others, five pieces of lands ("Lands") to his wife and two children. The two children executed a deed of family arrangement ("Family Deed") to renounce their respective entitlements to the Lands under section 6(1)(e) of the Distribution Act 1958 ("DA").
Premised on the Family Deed, the High Court issued an order to vest the Lands solely to the wife of the deceased ("Vesting Order"). Subsequently, the co-administrators of the deceased's estate executed five Forms 14A to transfer the Lands in her favour.
The Collector imposed ad valorem stamp duty on the Forms 14A on the basis that these Forms were in relation to a "release or renunciation by way of a gift" under item 66(c) in the First Schedule of the Stamp Act 1949 ("SA").
The High Court cited the Federal Court's decision in BASF Services (M) Sdn Bhd v Pemungut Duti Setem [2011] 3 AMR 11 and held that in determining the applicable stamp duty, the true nature of the instrument (i.e. the Forms 14A) must first be ascertained. In doing so, the High Court considered the following factors:
Brief facts
The deceased died intestate leaving, amongst others, five pieces of lands ("Lands") to his wife and two children. The two children executed a deed of family arrangement ("Family Deed") to renounce their respective entitlements to the Lands under section 6(1)(e) of the Distribution Act 1958 ("DA").
Premised on the Family Deed, the High Court issued an order to vest the Lands solely to the wife of the deceased ("Vesting Order"). Subsequently, the co-administrators of the deceased's estate executed five Forms 14A to transfer the Lands in her favour.
The Collector imposed ad valorem stamp duty on the Forms 14A on the basis that these Forms were in relation to a "release or renunciation by way of a gift" under item 66(c) in the First Schedule of the Stamp Act 1949 ("SA").
Decision
The High Court cited the Federal Court's decision in BASF Services (M) Sdn Bhd v Pemungut Duti Setem [2011] 3 AMR 11 and held that in determining the applicable stamp duty, the true nature of the instrument (i.e. the Forms 14A) must first be ascertained. In doing so, the High Court considered the following factors:
- the Forms 14A;
- the effect of section 6(1)(e) of the DA;
- the Family Deed; and
- the Vesting Order.
Having considered the above, the High Court held that the
Forms 14A attract nominal stamp duty of RM10 as these Forms cannot
be regarded as a gift under item 66(c) in the First Schedule of the
SA for the following reasons:
- the true nature of the Forms 14A is to give effect to the renunciation pursuant to the Family Deed and the Vesting Order;
- an entitlement to an estate is not equivalent to a beneficial and legal right or interest in the estate which can be given absolutely as a gift;
- the renunciation by the two children cannot be construed as a gift of entitlement to the wife because the two children had no right or interest in the Lands at all material times as they had renounced their entitlement at the outset (see Chor Phaik Har v Farlim Properties Sdn Bhd [1997] 3 MLJ 188 – a beneficiary of a deceased's estate has no right or interest in the estate until the administration of the estate is complete); and
- item 66(c) in the First Schedule of the SA cannot apply to the Forms 14A because the two children do not have "any property" in the estate.
The High Court having considered the various heads of charge
for a conveyance under paragraphs (a) to (i) of item 32 of the
First Schedule of the SA, held that stamp duty of RM10 was
chargeable on the Forms 14A under paragraph (i) of item 32 (i.e.
conveyance ... of any kind not otherwise
specifically charged with duty) as the instruments did not
fall into any of the other heads of charge under item 32.
The Court further ordered the Collector to refund the excess stamp duty pursuant to section 39(4) of the SA with interest at the rate of 5% per annum on the excess from the date of the oral decision until the Collector's full payment of the excess pursuant to section 11 of the Civil Law Act 1956 and Order 42 rule 12 of the Rules of Court 2012.
This case is instructive as it makes it clear that a memorandum of transfer of landed property to give effect to a renunciation of an entitlement to the estate of a person who died intestate is not subject to ad valorem stamp duty as a "release or renunciation by way of gift" under item 66(c) of the First Schedule of the SA, but rather to nominal duty of RM10.00 as a conveyance "of any kind not otherwise specifically charged with duty" under item 32(i) of the SA.
As a cautionary note, the principles in this case will not apply to the renunciation by a beneficiary of his interest under a will as the entitlement will be vested in the beneficiary upon the will being proved.
The Court further ordered the Collector to refund the excess stamp duty pursuant to section 39(4) of the SA with interest at the rate of 5% per annum on the excess from the date of the oral decision until the Collector's full payment of the excess pursuant to section 11 of the Civil Law Act 1956 and Order 42 rule 12 of the Rules of Court 2012.
Comments
This case is instructive as it makes it clear that a memorandum of transfer of landed property to give effect to a renunciation of an entitlement to the estate of a person who died intestate is not subject to ad valorem stamp duty as a "release or renunciation by way of gift" under item 66(c) of the First Schedule of the SA, but rather to nominal duty of RM10.00 as a conveyance "of any kind not otherwise specifically charged with duty" under item 32(i) of the SA.
As a cautionary note, the principles in this case will not apply to the renunciation by a beneficiary of his interest under a will as the entitlement will be vested in the beneficiary upon the will being proved.
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