Stamp Duty on Employment Contracts in Malaysia

In June 2025 LHDN told employers something most had never considered: every employment contract in the filing cabinet is a dutiable instrument, and the audits had already started. The concession that followed has now expired, and what replaced it is an ordinary compliance obligation with an ordinary penalty.

What is chargeable, and how much

LHDN’s position is that an employment contract creates a relationship between employer and employee, is an instrument under s.2, and is chargeable under the First Schedule by force of s.4(1).

The rate is RM10 under item 4, for each original copy of the contract.

Assessment follows contents rather than title. LHDN lists the markers of an employment contract: identified employer and employee, periodic payment of salary or wages, fixed working hours and place of work, compliance with employer policies, benefits such as EPF and SOCSO contributions and annual leave, work performed under the employer’s direction and control, and a bar on working for third parties without consent.

Where an instrument does not fall under item 4, LHDN treats it as a service contract chargeable under item 22(1)(a) instead — which is ad valorem, not RM10. A duplicate under s.12 carries RM10, provided the original is duly stamped.

The RM3,000 exemption that changes the picture from 2026

Item 4 carries its own exemption for an agreement for service or personal employment. Until the end of 2025 that exemption applied only where wages did not exceed RM300 per month — a threshold set decades ago and low enough that in practice every employment contract was dutiable.

The Finance Act 2025 (Act 874) substituted RM3,000 per month for RM300, with effect from 1 January 2026.

The consequence is substantial and almost entirely unreported: from 1 January 2026, an employment contract with monthly wages of RM3,000 or less is exempt from stamp duty under item 4’s own exemption. For a large part of the workforce the RM10 charge simply does not arise.

Above RM3,000 a month, the RM10 remains payable and everything below applies.

The three windows

This is the part that is widely garbled, because two different reliefs were granted and only one of them was an exemption from duty.

Contract finalised	Duty	Late-stamping penalty
Before 1 January 2025	Exempted by the Minister of Finance under s.80(1A)	Remitted under s.47A(2)
1 Jan 2025 – 31 Dec 2025	Payable — no exemption	Remitted under s.47A(2), only if stamped on or before 31 December 2025
From 1 January 2026	Payable	Payable — penalty applies in the ordinary way

Note the middle row carefully. Contracts signed during 2025 were never exempt from duty. They were only relieved of the penalty, and only if stamped inside the window. That window closed on 31 December 2025. The remission was applied automatically through STAMPS during the window; it is not available now.

Deadlines and penalties

Under s.47 the contract must be stamped within 30 days of signing in Malaysia, or 30 days after it is first received in Malaysia if signed abroad. Once assessed, the duty is payable within 14 days, or such period as the Collector allows.

Miss the 30 days and s.47A applies:

• RM50 or 10% of the deficient duty, whichever is greater, if stamped within three months after the deadline;
• RM100 or 20%, whichever is greater, thereafter.

On a RM10 duty the percentage limb is irrelevant — the penalty is RM50 or RM100 flat, five to ten times the duty itself. Across a few hundred employees that arithmetic is what makes this a live issue rather than a rounding error.

Two further consequences: under s.52 an instrument not duly stamped is inadmissible in evidence, which matters the day you need to enforce a restrictive covenant; and s.63 provides a fine for executing an unstamped instrument.

The documents people forget

• Renewals. Every new contract is a separate instrument requiring its own stamping.
• Addenda. An IT usage policy or a benefits explanation letter signed by both parties is a binding agreement and is chargeable.
• Study sponsorship offers. Chargeable, but under item 22(4).
• Contracts in other languages. For stamping, a contract in a language other than Malay or English must be translated line by line within the same document, by a certified translation service.

There is no fee for endorsing an exempted pre-2025 contract: under s.37(2A) the RM10 endorsement fee applies only where the duty exceeds RM10 and is exempted.

Stamping in practice

Applications go through STAMPS at stamps.hasil.gov.my. Register a user ID first: a company ID may submit for agreements belonging to the company and its clients, while an individual ID is limited to personal agreements.

Inside STAMPS, select Penyeteman Am — general stamping — as the stamping category, enter the date the agreement was signed, and choose Employment Contract as the document title before uploading. An adjudication number is issued on successful submission and becomes the reference for both the document and the payment.

For applications other than transfers of real property, LHDN states that the state stamp office will process a complete and orderly application and issue the notice of assessment in five to seven working days. Payment can then be made by FPX, or by virtual account where the amount exceeds the FPX transaction limit, the bank has no FPX service, or payment is coming from overseas — a virtual account number covers one adjudication number only, and confirmation takes at least three working days.

That five-to-seven-day notice-of-assessment step is the formal-assessment process. For an employment contract it has been overtaken by self-assessment: because the contract is a general-stamping instrument inside Phase 1 (see below), from 1 January 2026 the return you submit raises the assessment itself, and there is no waiting for LHDN to issue a notice.

Once paid, the system generates a stamp certificate. That certificate must be printed and attached to the original document: LHDN is explicit that a document is not treated as stamped if the certificate is not attached to it.

Employers stamping in volume should not do this one contract at a time. LHDN operates a bulk stamping route, requested through the feedback form on the HASiL portal, which returns a user manual and an XML specification for batch submission.

Common mistakes

• Reading the 2025 window as an exemption from duty. It remitted the penalty only; the RM10 was always payable.
• Assuming the concession still runs. It ended 31 December 2025.
• Stamping the contract but not the addendum. Each binding document is its own instrument.
• Not re-stamping on renewal. A renewed contract is a new instrument.
• Charging the RM10 to the employee. The first signatory bears it, and that is normally the employer.
• Treating interns and short-term staff as outside scope. If an employer-employee relationship exists, the document is dutiable — subject now to the RM3,000 monthly wage exemption from 2026.
• Applying the old RM300 exemption threshold. It became RM3,000 a month on 1 January 2026.

What’s next

Run an inventory by signing date, then by salary. Anything before 1 January 2025 is exempt from duty and can be endorsed free of charge if you want the certificate on file. Anything signed during 2025 and still unstamped now carries both duty and penalty, because the remission window has closed. From 1 January 2026, contracts above RM3,000 a month go through STAMPS inside 30 days as routine, and those at or below RM3,000 fall within the item 4 exemption.

Employment contracts sit in the general stamping category, which is inside Phase 1 of the stamp duty self-assessment system — so from 1 January 2026 you assess the duty yourself rather than waiting for LHDN to tell you what it is.