MALAYSIA Law and Practice Contributed by: Samantha Chiang Xin Li, Yee Yik Shien and Tay Zi Li, Zi Li & Partners
sia and the country where the non-resident lender is tax resident). 4.2 Other Taxes, Duties, Charges or Tax Considerations Stamp duty is payable on loan agreements and secu- rity documents within 30 days after they are first exe- cuted in Malaysia or, if first executed outside Malaysia, within 30 days after first being received in Malaysia. Ad valorem stamp duty is payable on the principal instrument (typically the loan agreement) at a rate of 0.5% of the loan amount. Where the underlying loan is denominated in a foreign currency, the same stamp duty rate applies, calculated on the MYR-equivalent of the loan amount. Fixed nominal stamp duty of MYR10 is payable in respect of each subsidiary instrument, including security documents and duplicate copies of any instrument that has already been stamped. Instruments executed by a Labuan entity in relation to a Labuan business activity, or instruments effecting the transfer of shares in a Labuan entity, are gener- ally exempt from stamp duty, subject to the fulfilment by the Labuan entity of the substance requirements prescribed by the Inland Revenue Board of Malaysia. 4.3 Foreign Lenders or Non-Money Centre Bank Lenders Malaysia has an extensive network of about 74 effec- tive double-taxation agreements (DTAs). These trea- ties help prevent double taxation and often provide reduced withholding tax rates on cross-border inter- est payments. Accordingly, while the domestic with- holding tax rate on interest to non-resident lenders is 15%, this may be lowered under an applicable DTA, provided the foreign lender furnishes a valid letter of certification from its home tax authority.
ment has been issued. Where the title document to the real property has yet to be issued, assignment over the rights, title and interests in the sale and purchase agreement is typically taken as a form of security. • Tangible movable assets such as a plant, machin- ery and equipment – Security is commonly taken by way of a fixed charge or debenture over such assets. • Inventories or stock-in-trade – A floating charge is created by way of a debenture to allow the security provider to continue dealing with such assets in the ordinary course of business until the occurrence of an event of default. • Shares – A fixed charge is created over the shares (applicable to shares which are certificated or in scripless form). • Bank accounts – A fixed charge is created over cash deposits and credit balances in bank accounts, and assignment is taken over such bank accounts for monitoring and control purposes. • Other receivables and claims – An assignment is taken over rights, title and interests over receiva- bles, and claims such as rights to receive moneys and claims to insurance proceeds. The applicable formalities and perfection require- ments include the following: • Stamp duty is payable on a security document – see 4.2 Other Taxes, Duties, Charges or Tax Considerations . Failure to stamp renders the secu- rity document inadmissible in evidence, and late stamping will be subject to a financial penalty. • Security granted by a company incorporated under the Companies Act 2016 (the “Companies Act”) is required to be lodged with the Companies Com- mission of Malaysia (CCM) within 30 days of the creation of a charge, together with a prescribed fee of MYR300. Failure to register renders the charge void against the liquidator and any creditor of the company as far as any security interests on the company’s property are conferred. Similarly, security granted by a company incorporated under the Labuan Companies Act 1990 is required to be lodged with the Labuan Financial Services Author- ity (LFSA) within one month from the date of crea- tion of the charge.
5. Guarantees and Security 5.1 Assets and Forms of Security
In Malaysia, assets typically available as collateral to lenders and the form in which they are taken include: • Real property (land and buildings) – A fixed charge is created over real property, where a title docu-
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