Employment Contract Stamping in Malaysia: What Employers Need to Know
Based on: LHDNM’s Requirements on Stamping of Employment Contracts, presented by MEF Adviser Datuk Hj Shamsuddin Bardan
Starting January 2025, Malaysia’s Inland Revenue Board (LHDNM) has begun actively enforcing the Stamp Act 1949 in relation to employment contracts. MEF Adviser Datuk Hj Shamsuddin Bardan recently provided an in-depth briefing on this development to over 2,400 HR professionals, clarifying the requirements, legal implications, and the next steps for employers.
Employment contract stamping is a crucial compliance requirement for employers in Malaysia. Under the Stamp Act 1949, all employment contracts must be stamped by the Inland Revenue Board of Malaysia (LHDN) to be legally enforceable. Employers who fail to comply may face penalties, disputes, or challenges in court.
In this guide, we break down everything you need to know about employment contract stamping in Malaysia — including the latest LHDN updates, deadlines, penalties, exemptions, and practical compliance tips for HR professionals and business owners.
Key Highlights from the Briefing
1. Legal Background
- The Stamp Act 1949 applies throughout Malaysia, including Sabah and Sarawak.
- While the term “employment contract” is not explicitly stated, it falls under the broad definition of an “instrument” which includes any written document.
- Therefore, employment contracts are subject to stamp duty, interpreted as RM10 per contract under First Schedule, Paragraph 4.
2. Stamping Requirement & Timing
- Stamping must be done within 30 days from the contract signing date.
- Failure to do so incurs penalties:
- RM50 or 10% (whichever is higher) if late by 31 days to 3 months.
- RM100 or 20% (whichever is higher) if later than 3 months.
- Contracts must be signed first (offer accepted) before they are eligible for stamping.
- Only one stamped copy is required to be kept by the employer (employee’s copy is optional and at their own cost).
3. Who Is Responsible for Stamping and Paying
- The employer is considered the party who first executes the contract, hence responsible for stamping and bearing the cost.
- Stamping can be done through the LHDNM digital franking system.
4. LHDN Enforcement (Starting Jan 2025)
- LHDN began audits in 2025, enforcing the Stamp Act for employment contracts for the first time.
- The audit covers contracts signed within the last 3 years (2022–2025).
5. Existing and Fixed-Term Contracts
- For existing contracts (signed long ago but still valid), employers may now proceed with stamping and submit an appeal for penalty waiver directly through the LHDNM digital franking system. The system will automatically calculate the penalty, and employers can click “Kemuka Rayuan” to submit their appeal and attach a supporting letter.
- For new contracts, stamp within 30 days to avoid penalties.
- Each new fixed-term contract (e.g. 2-year, 1-year) must be stamped separately.
- Avoid calling it a “renewal” as it may imply permanency and complicate legal status.
6. Exemptions & Future Proposal
- Only contracts for employees earning below RM300 are exempt, a threshold seen as outdated.
- MEF plans to propose raising this exemption limit (e.g. RM7,000 – RM20,000).
- MEF also suggests extending the compliance deadline from 31 Dec 2025 to 30 June 2026 to allow budget planning by employers.
7. Clarifications on Related Documents
- No stamping required for:
- Promotion, confirmation, resignation, increment, or bonus letters.
- Secondment letters (if employment remains with the same company).
- Required to stamp:
- New employment contracts when transferring to another company.
- Contract for service (consultant/advisor), subject to ad valorem duty based on contract value (RM1 per RM1,000, capped at RM500,000 duty).
8. Penalty Waiver Concession
- LHDN agreed in principle to waive penalties if contracts signed on or before 31 Dec 2025 are stamped by that date.
- Employers must submit an appeal for the waiver before making payment.
- Once you apply for stamping via https://stamps.hasil.gov.my, the penalty will be calculated automatically.
- To waive the penalty, simply:
- Click “Kemuka Rayuan” (Submit Appeal) on the portal.
- Attach your appeal letter.
- Wait for LHDN approval – employers are getting waivers approved under Section 47A of the Stamp Act 1949
- Be sure to settle the stamp duty within the stated payment deadline
Next Steps
MEF will continue to engage with LHDNM and the Ministry of Finance on issues such as:
- Revising the RM300 exemption threshold
- Extending the penalty waiver deadline beyond 31 December 2025
Stay tuned for official announcements and prepare internal processes to ensure compliance.
Published by CentralHR
