Malaysia Stamp Duty on Employment Contracts
- C.A.(M)
- 6 days ago
- 6 min read
Malaysia Stamp Duty on Employment Contracts
In 2025, the Inland Revenue Board of Malaysia (LHDN/HASiL) intensified its enforcement of stamp duty requirements for employment contracts under the Stamp Act 1949.
The following is a comprehensive guide based on the HASiL e-Newsletter Edition 3/2025 and official guidelines regarding the RM10 stamp duty for employment contracts.
1. Key Stamping Requirements & Deadlines
Under Item 4, First Schedule of the Stamp Act 1949, employment contracts (agreements between employers and employees) are subject to a fixed stamp duty of RM10.
Date Contract Finalised | Stamp Duty Status | Penalty for Late Stamping |
Before 1 Jan 2025 | Exempted | Waived/Remitted |
1 Jan 2025 – 31 Dec 2025 | Chargeable (RM10) | Waived (if stamped by 31 Dec 2025) |
From 1 Jan 2026 onwards | Chargeable (RM10) | Chargeable (if not stamped within 30 days) |
2. Employer's Responsibilities
Employers are required to review and update all employment contracts to ensure compliance.
Audit Readiness: LHDN issued the Stamp Duty Audit Framework (RKADS) on January 1, 2025, to prepare for the full implementation of the Stamp Duty Self-Assessment System (STSDS) starting January 1, 2026.
Retroactive Action: For contracts signed in 2025, employers should stamp them before December 31, 2025, to benefit from the penalty waiver.
Standard Operating Procedure (SOP): Stamping should now be part of the standard onboarding checklist. All contracts must be stamped within 30 days of execution (signing).
3. Which Documents Need Stamping?
Standard Employment Contracts: All full-time, part-time, temporary, and fixed-term contracts.
Offer Letters: If the offer letter is the only document establishing the relationship (no separate contract), it must be stamped.
Internship Agreements: If the agreement creates an employer-employee relationship, the RM10 duty applies.
Renewals & Addendums: Each renewal or supplementary agreement (e.g., changes to benefits or policies) is considered a new instrument and requires a separate RM10 stamp.
4. Penalties for Late Stamping (Effective 2026)
If a contract is not stamped within 30 days of signing, the following penalties apply:
Up to 3 months late: RM50.00 or 10% of the duty (whichever is higher).
More than 3 months late: RM100.00 or 20% of the duty (whichever is higher).
5. How to Pay (Digital Stamping)
LHDN has transitioned to digital systems to simplify the process. Employers can use:
STAMPS Portal (Stamp Assessment and Payment System): Register for an account at stamps.hasil.gov.my.
Process: Upload the contract $\rightarrow$ System calculates duty $\rightarrow$ Pay online via FPX $\rightarrow$ Download and print the Digital Stamp Certificate.
Batch Stamping: Employers with a large number of employees can apply for "Bulk Stamping" via the MyTax or STAMPS portal.
6. Why It Matters (The Risks of Non-Compliance)
Legal Admissibility: Under Section 52 of the Stamp Act 1949, an unstamped document is not admissible as evidence in court. This means an employer might be unable to defend themselves in a labor dispute or breach of contract case if the document isn't stamped.
Audit Exposure: With the new Audit Framework, LHDN is actively targeting SMEs for non-compliance.
Financial Costs: While the duty is only RM10, penalties for thousands of employees can become significant.
Upcoming Change: Budget 2026 Update
According to the Malaysian Budget 2026, the government proposed raising the exemption threshold. Effective January 1, 2026, employment contracts for employees with a monthly wage of RM3,000 or below are expected to be exempt from stamp duty (up from the previous outdated threshold of RM300).
How Bestar Malaysia can Help
In 2025, the Inland Revenue Board of Malaysia (LHDN) significantly tightened enforcement on the Stamp Act 1949, making it mandatory for all employment contracts to be stamped. For business owners, this adds a layer of administrative burden and legal risk.
Bestar Malaysia serves as a strategic partner to help companies navigate these new requirements, ensuring your workforce documentation is fully compliant and legally enforceable.
How Bestar Malaysia Simplifies Your Compliance
1. Automated Stamping Workflows
Bestar integrates stamp duty compliance into your existing HR or onboarding processes. Instead of manually handling each contract, Bestar helps you:
Identify Chargeable Instruments: Distinguish between standard employment contracts (RM10 flat rate) and service agreements (ad valorem duty).
Manage Deadlines: Ensure all contracts are stamped within the 30-day window to avoid penalties of up to RM100 or 20% of the duty.
2. Bulk Stamping Management
For companies with high-volume hiring or those needing to catch up on the 2025 amnesty period, Bestar utilizes the LHDN STAMPS (Stamp Assessment and Payment System) portal to handle bulk submissions.
Data Preparation: We assist in preparing the necessary XML files or batch data for LHDN.
Payment Processing: Bestar can manage the digital payment of duties (FPX/VA) and download Digital Stamp Certificates for your records.
3. Retroactive Audit & "Catch-Up" Services
LHDN has granted a penalty waiver for contracts signed in 2025, provided they are stamped by December 31, 2025. Bestar can:
Review your current payroll and HR files to find unstamped contracts from 2025.
Secure the RM10 stamping before the waiver expires, saving you from future audit fines.
4. Legal Safeguarding & Admissibility
Under Section 52 of the Stamp Act, an unstamped contract is not admissible in court. Bestar ensures your documents are legally "bulletproof" for:
Labor Court (JTK) disputes.
Industrial Relations cases.
Enforcement of non-compete or confidentiality clauses.
5. Employer of Record (EOR) & Payroll Integration
As a leading EOR provider, Bestar can act as the legal employer for your staff. In this role, we take full responsibility for:
Drafting LHDN-compliant contracts.
Paying all associated stamp duties.
Managing statutory contributions (EPF, SOCSO, EIS, and PCB).
Summary of Stamp Duty Rules (2025-2026)
Contract Signing Date | Stamp Duty Fee | Penalty Status |
Before Jan 1, 2025 | Exempted | No penalty |
During 2025 | RM10 | Waived if stamped by Dec 31, 2025 |
From Jan 1, 2026 | RM10 | Active Penalties apply after 30 days |
Don't wait for an LHDN audit to find gaps in your documentation. Bestar Malaysia provides the local expertise needed to keep your business running smoothly and compliant with the latest 2025/2026 tax regulations.
Website: www.bestar-my.com
Address: 12A-10 Plaza Permata, 6 Jalan Kampar, Sentul Selatan, 50400 Kuala Lumpur.
WhatsApp/Enquiries: +65 8836 4489 / +60 3 2389 3138
Checklist of the Documents Bestar would Need to Begin a Compliance Audit of Current Contracts
To help Bestar Malaysia perform a comprehensive compliance audit of your employment contracts, you will need to prepare a "data room" of your current HR and payroll documentation.
Since the LHDN Self-Assessment System (STSDS) is fully active as of January 1, 2026, and the 2025 penalty amnesty has ended, the audit will focus on identifying unstamped documents from the last three years to mitigate penalty risks.
Employment Compliance Audit Checklist
1. Primary Employment Instruments
Bestar will need access to the original or digital copies of all active contracts to verify stamping status.
[ ] Full-Time/Permanent Contracts: All current active agreements.
[ ] Fixed-Term/Contract-Based Agreements: Including any "Renewal" letters (which are treated as new instruments).
[ ] Part-Time & Temporary Contracts: Regardless of the duration of service.
[ ] Internship/Trainee Offer Letters: To determine if an employer-employee relationship exists.
2. Supplementary Documents (Ad-hoc Stamping)
LHDN requires that any document modifying the original contract also be stamped (RM10 per addendum).
[ ] Contract Addendums: Letters regarding salary adjustments, promotions, or changes in job scope.
[ ] Supplementary Agreements: Any side letters signed by both parties after the initial start date.
[ ] Mutual Separation Schemes (MSS) / Deeds: If any employees were recently terminated via a settlement agreement.
3. Ancillary HR Agreements
These often fall under "General Stamping" and are high-risk areas during an LHDN audit.
[ ] Non-Disclosure Agreements (NDAs): Standalone confidentiality agreements.
[ ] Training Bonds: Agreements where the company pays for training in exchange for a service period.
[ ] Staff Loan Agreements: If the company provides personal or housing loans to employees.
[ ] Secondment Letters: For employees moved between entities or locations.
4. Proof of Existing Compliance
Bestar needs to verify what has already been done to avoid double-stamping.
[ ] Digital Stamp Certificates: All .pdf certificates generated from the STAMPS portal.
[ ] Physical Revenue Stamps: Any older contracts that used physical "Setem Hasil" (to check for proper cancellation/ink-stamping).
[ ] Exemption Certificates: Any documents proving a contract was exempt (e.g., if the wage was below the RM3,000 threshold proposed for 2026).
5. Payroll & Administrative Records
Used to reconcile the number of employees against the number of stamped contracts.
[ ] Current Employee Master List: Including start dates and monthly wage figures (to verify threshold exemptions).
[ ] Form E (2024/2025): The employer’s annual return of remuneration.
[ ] STAMPS Portal Credentials: If you already have an account, Bestar may need access to review past filings.
Audit Target Tiers (Priority List)
When you hand these over, Bestar will likely categorize them as follows:
Tier | Priority | Audit Focus |
Tier 1 | Urgent | Contracts signed in 2026 (30-day window for stamping to avoid penalties). |
Tier 2 | High | Contracts signed in 2025 that missed the Dec 31 amnesty deadline. |
Tier 3 | Medium | "General Stamping" items like NDAs and Bonds signed in the last 3 years. |
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