it is It is very common for businesses to sign longing contracts that will go beyond one year. At the time of signing these contracts, the parties of the contracts would not have feared the expansion of the sales and service tax (SST) and therefore did not be created in the essential sections required to apply additional taxes.
When announcements with the guide came out on 9 June 2025, the taxpayers first began to understand the impact of expansion on their business. At that time, taxpayers were informed that they would be given something through “non-reviewable contract” exemption for a 12-month period to give them a throne from the influence of extended SST on the ongoing contracts.
Is Stamping really necessary?
On June 29, 2025, a major surprise was thrown on taxpayers, which stopped several businesses from enjoying this temporary discount for 12 months. Principal Impressments that will prevent businesses from enjoying 12-month non-reviewable contract exemption, a special situation that suggests that only 9 June 2025 was stamped before 2025, which would be able to enjoy the discount. This exemption is available only for construction contracts, rent or leasing service contracts and financial services contracts.
The need to seal documents before June 9, 2024 is of a retrospective nature and one of the important principles of tax is “certainty”. It is not good practice or law to bring in the rules and laws to be applied retrospectively.
We believe that the purpose of presenting on June 9, 2025 as a stamping date, although the announcement was made on June 29, 2025, was intended as an anti-priest measure to prevent misuse of this provision. Fear may be on the basis that businesses will try to revise the existing people to create new documents or benefit from exemption. Unfortunately, this can be a “overcome” because the actual transactions that are recorded by parties are effectively thrown out of the window.
The actual transaction that is unlikely to litigation in the court should be approved and these transactions will be stopped from enjoying exemption.
The Stamp Act does not require compulsorily to seal each written equipment. This only states that if you want to stamp it, you have to send it to the assistant and make an assessment. On this understanding, many taxpayers may not really have not appointed their agreements. Implementing the status of stamping requirement as a condition to benefit from exemption seems to be contradictory of business relations of contract parties.
Other problems around non-protectable contracts
It is very likely that we are going to face the same problems in the future, when we deal with similar provisions when the goods and service tax is implemented. The kind of problems that the taxpayers are going to face is “fixed contract values”, “reviewable or reviewable” and “price modification segment or price adjustment mechanism”, etc.
What happens when existing contracts have specific tax segments that allow parties to pass on any new taxes without changing the original contract price? Similarly, what happens to other sections that allow some reimbileable costs without affecting the original contract price for services or goods provided? How will such changes be explained? Will it fall within a non-protectable contract exemption, or will it be out? Many more challenges will face taxpayers while dealing with this exemption.
way forward
To avoid any dispute with the Royal Malaysian Customs Department, we would urge taxpayers to immediately urge the authorities to bring all their uncertainties around the issue and get a decision.
The article has been contributed by SM Thannemalai (www.thannees.com), Managing Director of Thanis Tax Consulting Services SDN BHD.
