Stamping of Employment Contracts in Malaysia: Is It Required?
Introduction
Employment contracts are a key document that sets out the terms of engagement between employer and employee. While many companies prepare and sign these contracts diligently, one question frequently arises: Do employment contracts need to be stamped in Malaysia? This article provides a practical guide for HR managers and employers on stamping employment contracts, including recent updates from the Inland Revenue Board (LHDN).
What is Stamping?
Stamping is the process of paying stamp duty to the Inland Revenue Board of Malaysia (LHDN) to officially validate certain legal documents, including contracts and agreements. Once stamped, the document is endorsed with a stamp (either physical or electronic), confirming that the appropriate duty has been paid.
In Malaysia, stamping is governed by the Stamp Act 1949.
Is Stamping of Employment Contracts Required by Law?
Yes, under the Stamp Act 1949, an employment contract is classified as an instrument chargeable with stamp duty if it falls within the categories listed under Schedule 1. LHDN has recently clarified that:
- The requirement applies to all contracts that fall under chargeable instruments, regardless of the nationality of the parties involved.
- The duty is calculated based on the date of the contract, not the date of stamping.
- The employer is responsible for stamping and any associated penalties, not the employee.
Why Should You Stamp Employment Contracts?
Even though the stamp duty is minimal, stamping offers significant benefits:
- Legal Admissibility in Court
An unstamped contract may not be admitted as evidence in court until the proper stamp duty (plus penalty) is paid. - Proof of Execution Date
Stamping acts as official validation of when the contract was signed. - Good HR Governance
Stamping is a best practice for formalizing employment relationships and avoiding compliance issues later.
Stamp Duty Rate for Employment Contracts
- RM10 for each copy of the employment contract (usually applied to duplicate copies).
- No additional duty applies unless the contract includes other chargeable elements such as loans or tenancy terms.
When to Stamp the Contract
Stamping should be done within 30 days from the date the contract is signed. If you miss this window, penalties will apply based on the length of the delay.
Penalties for Late Stamping (Effective 1 January 2025)
| Delay After Signing | Penalty |
|---|---|
Within 30 days | No penalty, just pay RM10 stamp duty |
31 days to 3 months | RM50 or 10% of the stamp duty, whichever is higher |
More than 3 months | RM100 or 20% of the stamp duty, whichever is higher |
These penalties are in accordance with Section 47A of the Stamp Act 1949. | |
How to Stamp an Employment Contract
- Complete the Contract
Ensure all details are filled and both parties have signed. - Submit for Stamping
- Use the STAMPS online system: https://stamps.hasil.gov.my
- Use the STAMPS online system: https://stamps.hasil.gov.my
- Pay the Stamp Duty
- RM10 per copy.
- Keep receipts for record-keeping.
- Retain a Stamped Copy
Maintain at least one stamped version in your HR file.
Frequently Asked Questions (FAQs)
1. What is the stamp duty amount for an employment contract?
The standard stamp duty is RM10 per copy. This applies to duplicate copies, usually retained by the employer and given to the employee.
2. What happens if I forgot to stamp the contract within 30 days?
If the contract is not stamped within 30 days from the date of signing, LHDN will impose a penalty based on the delay:
- RM50 or 10% of duty (whichever is higher) if late within 3 months
- RM100 or 20% of duty (whichever is higher) if late more than 3 months
3. Can I still stamp a contract signed more than 3 months ago?
Yes, you can. You will need to pay the original RM10 stamp duty plus a RM100 penalty (or 20% of duty, whichever is higher).
4. Who should bear the cost of stamping — the employer or the employee?
The employer should bear the cost of stamping, as the contract is typically prepared and executed as part of the hiring process. LHDN also considers the employer as the responsible party in the event of late payment penalties.
5. Can I use the STAMPS online portal for stamping?
Yes, eligible employers can use LHDN’s STAMPS system at https://stamps.hasil.gov.my to submit documents electronically for stamping.
Need help stamping your contracts? Contact us or reach out to our support team today.
