New stamp duty for service contracts prohibitive.

Byline: Ivy Chang

THE recent announcement to impose a duty of 0.5 per cent of the contract sum on service agreements may see up to 70 per cent of such agreements not stamped as the costs are prohibitive, according to lawyer S.B. Cheah.

He said contractors in lean times may take a profit margin of between three and five per cent and that the new stamping rate, which works out to a significant sum, will discourage construction industry players from stamping their agreements.

"They'll ask whether it's necessary to stamp agreements," he said, adding if the stamp duty payable on a RM20 million contract is RM100,000, he is quite certain the agreement would not be …