The Inland Revenue Board of Malaysia (LHDN) has issued comprehensive guidance on employment contract stamping requirements through their Frequently Asked Questions (FAQ) document dated July 3, 2025.
This guidance comes following the Ministry of Finance's decision to grant stamp duty exemptions for certain employment contracts, marking a significant development in Malaysian employment law compliance.
Legal Foundation and Mandatory Requirements
Under subsection 4(1) of the Stamp Act 1949 (SA 1949), all instruments listed in the First Schedule must be stamped according to the rates specified therein. Employment contracts fall under this mandatory requirement as they constitute written agreements that establish the legal relationship between employers and employees.
The importance of proper stamping cannot be overstated - according to section 52 of SA 1949, instruments that are not duly stamped are inadmissible as evidence in court proceedings. This legal consequence makes compliance with stamping requirements crucial for protecting both employer and employee rights.
Stamp Duty Exemption Timeline: What Employers Need to Know
LHDN has established a clear timeline for stamp duty treatment of employment contracts:
1) Contracts Finalized Before January 1, 2025:
Complete exemption from stamp duty
All late stamping penalties remitted
Optional submission to LHDN for endorsement to obtain certification of stamp duty exemption (no fee charged)
2) Contracts Finalized January 1 - December 31, 2025:
Subject to standard RM10 stamp duty
Late stamping penalties remitted if contracts are stamped on or before December 31, 2025
Automatic penalty remission processing through STAMPS system
Contracts Finalized From January 1, 2026:
Full stamp duty liability of RM10 applies
Standard late stamping penalties apply for delayed compliance
Understanding Employment Contract Characteristics
LHDN has clarified that stamp duty liability depends on the content of the agreement rather than its title. An employment contract is characterized by several key elements:
Clear Employer-Employee Identification: The contract explicitly identifies the party offering work and the party accepting employment
Regular Remuneration Structure: Fixed salary or wages paid on a scheduled basis (monthly or other intervals)
Defined Working Arrangements: Specified working hours and workplace location showing employer control
Policy Compliance Requirements: Employee obligation to follow employer directions, internal procedures, and work regulations
Statutory Benefits Provision: EPF contributions, SOCSO coverage, and annual leave entitlements
Direct Supervision: Work performed under employer direction, monitoring, and reporting
Exclusivity Clauses: Restrictions on working for third parties during the contract period
Comprehensive Scope of Stamping Requirements
The FAQ clarifies that all types of employment arrangements require stamping, including:
Temporary and short-term contracts
Part-time employment agreements
Contract worker arrangements
Trainee and internship agreements (where employer-employee relationships exist)
Contract renewals (treated as separate instruments)
Supplementary documents and addendums to employment agreements
Special Considerations for Additional Documents:
Employers should note that various supplementary documents also require stamping:
IT policy agreements
Employee benefits explanation documents
Employer-sponsored study agreements (under sub-item 22(4) of the First Schedule)
Language and Translation Requirements
For contracts in languages other than Bahasa Melayu or English, line-by-line translations must be included in the same document. These translations must be prepared by qualified translation services such as:
Malaysian Translators Association (https://www.malaysiantranslatorsassoc.com/ms/)
Malaysian Institute of Translation & Books (https://www.itbm.com.my/)
Stamp Duty Rates and Payment Responsibilities
Standard Rate Structure:
Employment contracts establishing master-servant relationships: RM10 per original copy (Item 4, First Schedule SA 1949)
Service contracts not falling under Item 4: Subject to Item 22(1)(a) rates
Duplicate copies: RM10 (provided original is properly stamped)
Payment Responsibility: The first signatory to the contract bears the stamp duty obligation, typically the employer who signs the offer letter first.
Compliance Timeline and Penalties
📅 Stamping Deadlines:
30 days from signing date (if signed in Malaysia)
30 days from receipt date (if signed abroad)
Payment due within 14 days of assessment or as permitted by the Collector
⚠️ Penalty Structure for Late Stamping:
Within 3 months after 30-day deadline: RM50 or 10% of duty shortfall (whichever is higher)
After 3 months: RM100 or 20% of duty shortfall (whichever is higher)
Practical Implementation Through STAMPS System
The LHDN has streamlined the stamping process through their online STAMPS system:
Registration Process:
Register at https://stamp.hasil.gov.my
Company IDs can process applications for company and client contracts
Individual IDs limited to personal contract applications
Application Steps:
Select Application Form > Stamping submenu
Choose 'General Stamping' category
Select Stamp Office and input agreement date
Choose 'Employment Agreement' or 'Employment Contract' document title
Complete required information and upload documents
Submit application for processing
Payment Options:
FPX for standard transactions
Virtual Account (VA) for high-value payments, non-FPX banks, or overseas payments
Processing time: 5-7 working days for complete applications
Bulk Processing Capabilities
Organizations with multiple contracts can apply for bulk stamping through the LHDN's Customer Feedback Form at https://maklumbalaspelanggan.hasil.gov.my/Public/.
Approved applicants receive user manuals and XML specifications for batch processing.
🎯 Strategic Recommendations for Employers
Immediate Action Required: Review all employment contracts finalized after January 1, 2025, to ensure compliance before December 31, 2025
Document Review: Examine all employment-related documents beyond basic contracts, including policies and addendums
System Integration: Consider implementing STAMPS integration for streamlined processing
Legal Consultation: Engage qualified legal counsel to review contract templates and ensure proper characterization
Training Programs: Educate HR teams on new requirements and compliance procedures