(Tax Update) Malaysia Stamp Duty Overhaul : Self-Assessment and Higher Penalties Part 3

(Tax Update) Malaysia Stamp Duty Overhaul : Self-Assessment and Higher Penalties Part 3

IRB recently strictly enforce stamping of fixed-term job contracts under Schedule 1 (First Schedule) of the Stamp Duty Act 1949.

For many SME bosses, this might seem like a minor compliance issue—but overlooking it can lead to penalties, legal disputes, and exposure during tax audits.

What Is Schedule 1 of the Stamp Duty Act?

Schedule 1 of the Stamp Duty Act 1949 sets out the types of documents and agreements that must be stamped, including:

  • Service agreements (such as employment contracts)

  • Loan agreements

  • Sale and transfer of property

  • Leases and tenancy agreements

  • Insurance policies

  • Articles and Memorandum of Association

  • Instruments related to shares and securities

  • & more

Each item is either charged a fixed rate (e.g., RM10) or a percentage of the transaction value (e.g., property or loan agreements).

Fixed-Term Employment Contracts – What You Must Do

Under Item 22 of Schedule 1, any service agreement or memorandum of agreement that is not otherwise specified must be stamped with RM10.

Examples:

  • Internship letters

  • Probation contracts

  • Project-based agreements

  • Contract staff letters with a start and end date

Failure to stamp:

  • Makes your contract inadmissible in court

  • Triggers late stamping penalties from RM25 to RM100 or more

  • May raise red flags during IRB tax audits

IRB’s Self-Assessment System Applies

  • Stamp duty operates on a self-assessment basis

  • This means: You are responsible to declare, calculate, and pay the duty on time

  • There’s no excuse for “I didn’t know”

What SMEs Should Do Now

  • Audit your HR templates – Are your employment contracts stamped?

  • Stamp all fixed-term contracts within 30 days of execution! We understand that the Federation of Malaysian Manufacturers (FMM), Malaysian Employers Federation (MEF), and other industry bodies are planning to hold an open dialogue with IRB to address this issue.

  • Assign responsibility to HR/admin or engage your tax agent

  • Remember: RM10 now can save you thousands later

KTP Says: Stamp or Suffer.

This is one of those small costs that bring big consequences if ignored.
Let’s wait until IRB come out a further clarification of FAQ on this issue.

Past blog
16 April 2025 Malaysia Stamp Duty Overhaul : Self-Assessment and Higher Penalties
https://www.ktp.com.my/blog/malaysia-stamp-duty-self-assessment/16apr2025

16 May 2025 Malaysia Stamp Duty Overhaul : Self-Assessment and Higher Penalties Part 2
https://www.ktp.com.my/blog/stamp-act-malaysia-2024-part2/16may2025

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