Your Service Contract Is a RM10 Stamp Duty Document. LHDN Just Said No!

01The contract in your drawer

You signed a RM2.4 million fit-out contract last year. Lawyers checked the scope. Your QS checked the rates. Finance checked the payment milestones.

Nobody checked the stamp.

That contract is now sitting in a drawer, unstamped. Under the Stamp Act 1949, it is not just paperwork. It is a dutiable instrument, and the duty sits with you as the party receiving the service.

On 29 September 2026, LHDN issued a fresh Garis Panduan on stamp duty for service agreements (ref. LHDN.AG.600-1/10/3). It restates the rules, walks through seven worked examples, and spells out exactly what your contract must say to qualify for relief.

If you award, receive, or subcontract any kind of service, this one is for you.

02Why a service contract is a "security"

The Stamp Act 1949 does not define "service". LHDN adopts the plain meaning: work done for a customer (para 1.2). Construction, maintenance, security, consultancy and advisory services are all in, and the list is not closed.

Here is the part that surprises most business owners. LHDN treats a service agreement as a security instrument (para 2.1).

"Security" here does not mean collateral or a charge over property. It means an obligation to pay money created by the instrument (para 2.2). Your contract promises payment for work. That promise is the security, even if payment only falls due when conditions are met.

The headline position, before any relief, is as follows.

• Charging provision. Item 22(1)(a), First Schedule, Stamp Act 1949.
• Rate. RM5 for every RM1,000 or part of it, on the contract value (para 2.3).
• Value includes SST. The dutiable value includes the Sales and Service Tax charged on the contract (para 2.3).
• Who pays. The party receiving the service, under item 2, Third Schedule (Examples 1 to 5).

At 0.5%, an unrelieved RM27.5 million contract would carry RM137,505 in duty. That is why the remission order matters.

03Where your contract sits decides what you pay

Relief comes from the Stamp Duty (Remission) Order 2021, P.U.(A) 428/2021. It applies to service agreements executed from 28 December 2018 (para 2.4). Your duty depends on which tier of the contract chain you sit in.

You are the main provider contracting with a private party. You pay 0.1% of the contract value, and the balance is remitted (para 2.4(A)). In Example 1, a RM27,500,700 contract pays RM27,501 instead of RM137,505. The remitted amount is RM110,004.

You are a sub-provider under a Government award. Where the main provider holds a contract from the Government, a State, a Ruler or a local authority, the subcontract between you also pays 0.1% (para 2.4(B)). In Example 2, the KLM to ABC subcontract pays the same RM27,501.

You are further down the chain. Any subsequent subcontract is capped at RM50, with the balance remitted (para 2.4(C)). In Example 3, a RM25 million subcontract would have carried RM125,000. It pays RM50.

Your full duty is already below RM50. There is nothing to remit, so you pay the actual duty at RM5 per RM1,000. In Example 4, a RM9,000 subcontract pays RM45.

Your 0.1% works out below RM10. The minimum duty of RM10 under section 36CB applies. In Example 5, a RM9,000 grass cutting contract works out to RM9 and rises to RM10.

The 0.1% ad valorem charge applies at one tier only in a multi-tier chain (para 2.5). Every tier below it drops to the RM50 cap.

What about the Government contract at the top? The instrument is still dutiable, but where the Government, a State or a Ruler bears the duty, it is exempt under General Exemption para 1 to section 35, First Schedule. Where a local authority bears it, P.U.(A) 174/1986 exempts it (para 1.3). You still submit it for an exemption endorsement under section 37(2) (para 1.4).

One rounding point. The 0.5% figure is computed on value rounded up to the next RM1,000. The 0.1% figure in Example 1 is rounded up to the next ringgit.

04When the remission does not help you

P.U.(A) 428/2021 only works when the contract value can be determined. Two common contract shapes fall outside it (para 2.6).

The total amount is uncertain. Think of a land filling contract billed at RM115 per lorry load until the job is done (Ex. 6). Item 22(1)(a) does not apply. The agreement instead pays RM10 under item 4, First Schedule. Here the duty falls on the party who prepares, makes or executes the instrument, under section 33(a) read with item 1, Third Schedule.

The payment period is uncertain. Think of a panel clinic paid RM2,000 a month, terminable on three months' notice (Ex. 7). Duty falls under item 22(1)(b) at RM1 for every RM100 or part of it. On RM2,000, that is RM20, payable by the company receiving the service.

You will recognise this second shape everywhere. Monthly retainers, maintenance contracts, outsourced payroll and cleaning services often run open ended with a notice clause. Check how yours are drafted.

05Three things your subcontract must say to get the RM50 cap

The RM50 treatment is not automatic. Para 2.7 requires the lower-tier agreement to state these points clearly.

• The parties to, and the execution date of, the upstream agreement: the main provider's contract with the awarding party, or the sub-provider's contract with a main provider holding a Government, State, Ruler or local authority award.
• The subject matter of the agreement.
• That the upstream agreement has been duly stamped at the rate in para 2.4(A) or 2.4(B).

Miss any of these, and you hand the stamp officer a reason to assess at the full rate. On a RM25 million subcontract, that is the gap between RM50 and RM125,000.

06Source and notes

Source: LHDN, Garis Panduan Pengenaan Duti Setem ke atas Surat Cara Perjanjian Perkhidmatan, ref. LHDN.AG.600-1/10/3, dated 29 September 2026. Effective from its date of issue. Paragraph and example references above follow that guideline.

This article is general education, not advice on your specific facts. Stamp duty depends on how your agreement is worded and who the parties are. Speak to a licensed tax agent before acting.