Starting from 1 January 2025, the Inland Revenue Board of Malaysia (LHDN) has begun strict enforcement of stamp duty requirements on employment contracts under the Stamp Act 1949, following the rollout of the Stamp Duty Audit Framework (SDAF).
Whether you are hiring new staff or renewing contracts, this article will guide you through the legal obligations, penalty risks, and waiver opportunities available to employers in Malaysia.
📜 Legal Background
Under the Stamp Act 1949, employment contracts are deemed chargeable instruments and are subject to RM10 stamp duty per contract.
Exemption:
Only contracts for employees earning monthly wages below RM300 are exempt—though this threshold is widely regarded as outdated.
Enforcement Begins:
Although this requirement has long existed, LHDN only began active audits and enforcement in 2025.
Stamping Timeline & Penalties
Employment contracts must be stamped within 30 days of execution (i.e., after the employee signs and accepts the offer).
| Delay Period | Penalty (Whichever is Higher) |
| 31 days to 3 months | RM50 or 10% |
| Over 3 months | RM100 or 20% |
Unstamped contracts remain legally binding but may be inadmissible in court as evidence under Section 52 of the Stamp Act.
Waiver & Compliance Periods
LHDN has announced a temporary penalty waiver for employers, depending on the date of contract execution:
| Contract Signed | Stamp Duty | Penalty | Conditions |
| Before 1 Jan 2025 | Waived | Waived | Full exemption granted |
| 1 Jan – 31 Dec 2025 | RM10 | Waived if stamped by 31 Dec 2025 | Must stamp before deadline |
| 1 Jan 2026 onwards | RM10 | Full penalty applies | No waivers available |
What Employers Should Do Now
- Stamp all employment contracts signed in 2025 before 31 Dec to avoid penalties.
- Prepare SOPs to ensure stamping within 30 days of contract execution.
- Train HR, legal & finance teams on the updated FAQs and digital STAMPS portal.
- Undergo a compliance check across all written instruments (including consultancy agreements and addenda) due to LHDN’s self-assessment and selective audit drive.
HTL & Co. – Your Compliance Partner
We support businesses by:
- Advising on which contracts need stamping
- Preparing and submitting digital stamp duty applications
- Drafting appeal letters for penalty waivers under Section 47A
- Conducting internal audits to ensure full compliance
Disclaimer: This article is for general informational purposes and does not constitute legal or tax advice. For tailored advice, please contact our professionals.
