Stamp duty self assessment needs stronger valuation safeguards

Malaysia’s introduction of the stamp duty self‑assessment system marks an important step towards modernising tax administration. It is designed to improve efficiency, reduce processing time, and place greater responsibility on taxpayers and practitioners. 

However, as with any system that relies heavily on self‑declaration, its effectiveness ultimately depends on the strength of its safeguards. 

One area that deserves closer attention is the valuation of property transactions, particularly whether independent valuation reports should be made a mandatory requirement in stamp duty submissions.

At present, stamp duty is generally assessed based on the higher of the transaction’s consideration price or the market value. In theory, this ensures fairness and protects government revenue. 

In practice, however, the reliance on declared sale and purchase agreement (SPA) prices creates room for under‑declaration. 

In some cases, property values may be stated below market levels potentially reducing the stamp duty payable. While not universal, such behaviour can undermine the integrity of the tax base and contribute to inconsistencies in valuation reporting across the market.

Under a self‑assessment system, this issue becomes more pronounced. Since taxpayers and their advisers are responsible for declaring the correct value, the Inland Revenue Board (LHDN) is often placed in a position where it must verify compliance after submission. 

This largely reactive approach can lead to inefficiencies, as discrepancies are often identified only during audits or post‑submission reviews. When undervaluation is detected, it may result in reassessments, disputes and delays, all of which increase administrative workload and reduce overall system efficiency.

The burden of these processes does not fall on LHDN alone. The Jabatan Penilaian dan Perkhidmatan Harta (JPPH) is frequently called upon to provide valuation references or confirmations when disputes arise. 

This creates additional pressure on valuation officers and can lead to bottlenecks, especially when dealing with high transaction volumes. In effect, the system can generate downstream work that might otherwise be mitigated at the point of submission.

Introducing a requirement for independent valuation reports in stamp duty self‑assessment could, in my view, help address these challenges. 

A professionally prepared valuation provides an objective market benchmark at the outset of the transaction. This is likely to reduce the likelihood of undervaluation, strengthen compliance quality and improve the reliability of declared values. 

It also helps shift verification from a reactive to a more preventive approach, ensuring that potential discrepancies are addressed before submission rather than after assessment.

From an administrative perspective, such a requirement could also ease the workload on JPPH and LHDN. Instead of spending resources on reassessing or disputing declared values, these agencies could focus on higher‑risk cases and policy‑level enforcement. 

Over time, this would improve efficiency, reduce delays and enhance the overall effectiveness of the tax system.

Concerns about increased transaction costs and procedural delays are understandable. 

However, in many cases, property transactions already involve valuation reports for bank financing purposes. 

Formalising this requirement for stamp duty purposes would therefore in many instances not introduce a fundamentally new burden, but rather align tax compliance with existing market practice. 

Moreover, the cost of a valuation report may be modest compared to the potential loss of tax revenue arising from undervaluation or the administrative costs of dispute resolution.

A balanced approach could also be considered, rather than a blanket requirement. Independent valuation reports could be made mandatory for related‑party transactions, commercial properties and high‑value transfers, while standard residential transactions could remain under a simplified regime where appropriate safeguards exist. 

This would help ensure that regulation is targeted where risk is highest, without unnecessarily burdening low‑risk transactions.

In conclusion, while Malaysia’s stamp duty self‑assessment system represents progress in tax administration, it can be further strengthened by addressing the issue of valuation integrity. 

Making independent valuation reports a standard or targeted requirement could help reduce undervaluation, improve compliance and ease the administrative burden on both LHDN and JPPH. 

More importantly, it would support greater transparency and fairness in the property market, and help ensure that the system remains both efficient and resilient in the long term.

Dr Tham Kuen Wei
PhD Real Estate Finance (Malaya), MRISM is assistant professor at the Department of Real Estate, Faculty of Built Environment, TAR University of Management & Technology, Kuala Lumpur

Editor’s note: The views expressed in this article reflect the personal opinions of the writer and may not necessarily represent the positions or perspectives of the university. The opinions offered are based on the writer's professional experience as a registered valuer, property manager and estate agent.

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