(TAX UPDATE) Frequently Asked Questions (FAQ) : Stamping of Employment Contracts in Malaysia

(TAX UPDATE) Frequently Asked Questions (FAQ) : Stamping of Employment Contracts in Malaysia

A month after LHDN (IRB) announced the stamping requirement for employment contracts, they have released an official FAQ dated 3 July 2025 to clear the air but also raise more questions.

Here’s the quick summary of what employers need to know:

1. Is it compulsory to stamp employment contracts?
Yes. Under Section 4(1) of the Stamp Act 1949, all legal documents listed in the First Schedule must be stamped. Employment contracts fall under this, so they must be stamped.

2. Why is stamping of employment contracts important?
It’s a legal requirement under Section 36 of the Stamp Act. Unstamped contracts cannot be used as evidence in Malaysian courts (Section 52).

3. What counts as an employment contract?
Any document that shows a clear employer-employee relationship. Common features include:
✅ Clear identification of employer and employee
✅ Regular salary or wage payments
✅ Specific working hours and workplace
✅ Employee must follow company rules and policies
✅ Provision of benefits like EPF, SOCSO, annual leave
✅ Work done under employer’s instructions and control
✅ Employee cannot work for others without approval

It covers offer letters, appointment letters, fixed-term contracts, renewal letters, and secondment agreements.

But what about internal transfer letters, promotion letters, salary increments, or even bonus letters?

Let’s clear the confusion.

4. Do temporary, part-time, or contract worker agreements need to be stamped?
Yes, all types of employment contracts must be stamped.

5. Must we stamp every time a contract is renewed?
Yes. Each new contract is considered a separate document and must be stamped.

6. If only the offer letter is signed and it contains the terms of employment, does it need to be stamped?
Yes. If the offer letter is the only document that creates the employment relationship, it must be stamped.

7. How about offer letters to interns or trainees (e.g., 3 to 6 months with only allowance)?
If the letter shows a clear employer-employee relationship, it must be stamped.

8. What about extra documents like IT policies or benefits letters?
If those documents are signed by both employer and employee and form part of the employment contract, they need to be stamped too. Example:
✅ IT policy — needs stamping
✅ Benefits explanation letter — needs stamping
✅ Study sponsorship offer — needs stamping (under Item 22(4) First Schedule)

9. Can contracts be written in languages other than Bahasa Melayu or English?
Yes, but for stamping, they must be accompanied by a certified line-by-line translation. Certified translators include Malaysian Translators Association or ITBM.

10. Who pays the stamp duty — employer or employee?
The person who signs the contract first pays. Usually, the employer signs first, so the employer pays the duty.

11. What’s the deadline for stamping after signing the contract?
✅ Signed in Malaysia — stamp within 30 days of signing
✅ Signed overseas — stamp within 30 days of receiving in Malaysia
Stamp duty must be paid within 14 days of assessment.

12. How much is the stamp duty for employment contracts?
✅ RM10 per original copy, based on content (not document title)
✅ If it’s a service contract (not employer-employee), different rates apply under Item 22(1)(a)
✅ Duplicate copies stamped at RM10 if the original has been stamped properly

13. What happens if I don’t stamp the contract?
It’s an offence. You may face penalties:
✅ RM50 or 10% of the underpaid duty (whichever higher) if late within 3 months
✅ RM100 or 20% of the underpaid duty (whichever higher) if late beyond 3 months

14. Are there exemptions for stamp duty on employment contracts?
Yes:
✅ Contracts finalised before 1 Jan 2025 — exempt from stamp duty and penalties
✅ Contracts signed between 1 Jan 2025 to 31 Dec 2025 — penalty waived if stamped by 31 Dec 2025
✅ Contracts from 1 Jan 2026 onwards — full duty and penalties apply if late

15. Do exempted contracts signed before 1 Jan 2025 need to be endorsed by LHDN?
Yes, you can submit them to LHDN for assessment and get an official exemption certificate.

The FAQ mentions "boleh" regarding stamping of contracts signed before 2025 thus suggesting it's optional, but better to get proper confirmation from LHDN.

16. Is there a fee to endorse exempted contracts?
No fee, unless the original duty exceeds RM10, then RM10 is charged.

17. Do all employment contracts signed after 1 Jan 2025 need to be stamped?
Yes, must be stamped in line with the Stamp Act.

18. Will there be penalties for late stamping after 1 Jan 2025?
No penalties, provided stamping is done by 31 Dec 2025.

19. Is penalty waiver for 2025 contracts automatic in STAMPS?
Yes, STAMPS will automatically apply the waiver for eligible contracts.

20. What about contracts signed from 1 Jan 2026?
✅ RM10 stamp duty applies
✅ Late stamping penalties will be enforced

21. How to apply for stamping through STAMPS?
✅ Register at https://stamp.hasil.gov.my
✅ Submit application under "Penyeteman Am"
✅ Select "Employment Contract"
✅ Upload documents and submit
✅ Once processed, pay the duty and print the stamp certificate to attach to the contract

22. Payment methods for stamp duty?
✅ Online via FPX (immediate payment)
✅ Virtual Account (for payments exceeding FPX limit or from overseas)

23. How to submit bulk applications for stamping?
Submit a request via LHDN’s feedback portal: https://maklumbalaspelanggan.hasil.gov.my/Public
LHDN will provide the bulk application guide and XML specifications.

24. Need help or more info?
Contact LHDN via:
📞 Hasil Contact Centre: 03-8911 1000 (or +603-8911 1000 from overseas)
💬 HASiL Live Chat
💻 Feedback form: https://maklumbalaspelanggan.hasil.gov.my/Public
🌐 STAMPS portal for FAQs and user manual

Key Takeaway for Taxpayers (Especially SMEs with Limited Resources):

✅ Stamping employment contracts is now a serious compliance matter — no longer optional or "wait and see."
✅ Even simple documents like offer letters, renewal letters, and secondment agreements fall under this requirement.
✅ Don’t assume only big companies need to comply — LHDN is looking at all businesses, including SMEs.
✅ If your HR or admin team has limited manpower, start streamlining processes now — assign someone to handle STAMPS submissions properly.
✅ Missed deadlines = penalties. Prevention is cheaper than paying fines later.
✅ For contracts signed before 2025, you may still submit to LHDN for endorsement — better to settle now than risk future issues.

Visit Us

  • Wisma KTP, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

  • Wisma THK, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

KTP (Audit, Tax, Advisory)

An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Bookkeeping, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients

KTP Lifestyle

An internal community for our colleagues on work and leisure.

KTP Career

An external job community on vacancies in Johor Bahru for interns, graduates & experienced candidates.

#Thk

#KTP


taxKtp Ktpstamp duty