A New Rule Every Malaysian SME Should Know

Did you know? Starting 1 January 2025, the Inland Revenue Board of Malaysia (LHDN) has officially implemented the Stamp Duty Audit Framework, focusing on whether companies are properly handling stamp duty for employment contracts

This new regulation especially affects SME owners, HR teams, entrepreneurs, and company secretaries. If your company frequently signs employment contracts but neglects stamp duty obligations, you could be at risk of penalties.

What Is Stamp Duty & Why Does It Matter for Employment Contracts?

Stamp duty is a government-imposed tax required to give certain legal documents—including employment contracts—legal enforceability.

According to the Stamp Act 1949 (Malaysia), all legally binding employment contracts must be stamped within 30 days of signing. This includes:

Full-time employment agreements
Part-time contracts
Fixed-term/contract-based employment agreements
Internship agreements

What Happens If You Don’t Stamp the Contract?

LHDN has the right to take action on unstamped employment contracts, including:

Late penalty applies based on delay:
Within 3 months:
RM50 OR 10% of the stamp duty (whichever is higher)
After 3 months:
RM100 OR 20% of the stamp duty (whichever is higher)
Risk of audit by LHDN
Contract may be invalid in legal disputes

Now that the Stamp Duty Audit Framework is in effect, LHDN is expected to actively monitor compliance in this area.

What Should Employers Do? 2 Things You Must Act On

1. Use the LHDN STAMPS Online System
To make things easier, LHDN has launched the STAMPS online platform, where employers can ：

Upload employment contract copies
Calculate applicable stamp duty
Pay online and receive a digital stamp certificate

No more physical visits — quick and easy!

2. Establish Internal HR Compliance Processes

Many SMEs or HR departments are not familiar with stamp duty procedures, which often leads to delays or missed submissions.

We recommend：

Providing HR with compliance training
Including stamp duty processing in your employee onboarding SOP

Frequently Asked Questions (FAQ)

Q: Do all employment contracts require stamp duty?

Yes. Regardless of the employment type, if it’s a formal contract, it must be stamped.

Q: How much is the stamp duty?

Most employment contracts fall under “non-monetary” documents and are charged RM10. If the contract includes clauses on salary or bonus payments, the amount may vary. It’s best to consult a professional.

Q: Can I stamp a previously signed contract?

Yes, but late payment penalties and interest may apply. It’s best to act quickly.

Instead of waiting for LHDN to come knocking, it’s smarter to review your employment contract processes now.

A little attention to compliance today can save your business a lot of unnecessary trouble tomorrow.

Articles