(TAX UPDATE) From Contracts to MOUs … Which Agreements Need Stamp Duty

(TAX UPDATE) From Contracts to MOUs … Which Agreements Need Stamp Duty

The long debate on whether employment contracts need stamp duty is finally over. The answer is yes. And if you think that’s the end of the story, think again.

In recent months, we’ve seen a rise in stamp duty audit notices issued by the Inland Revenue Board (LHDN). These are not polite reminders. Officers will turn up at your premises. They will ask for documents. They will go through them line by line.

This is not random. It is part of LHDN’s push to enforce the self-assessment system for stamp duty, similar to what already happens for income tax and company tax audits. The message is clear : stamp duty compliance is now a priority.

Why is LHDN auditing?

LHDN wants to verify that your business has stamped all documents and agreements required under the Stamp Act 1949. This covers a wide range of documents. It does not matter if the document is signed physically or electronically. It does not matter if the value is small or large. It does not matter if you used a lawyer or not.

They will not just look at what you signed last week. They can go back two or three years. If they find anything that should have been stamped but was not, the penalties can be painful.

What documents will LHDN request?

Under Section 3A of the Stamp Act 1949, your company must cooperate during a stamp duty audit. LHDN can request to see any document that may be subject to duty. Examples include:

Intercompany transactions

  • Memorandum of Understanding (MoU)

  • Non-Disclosure Agreement (NDA) or Confidentiality Agreement

  • Licensing agreement

  • Distribution agreement

  • Agency agreement

  • Joint venture agreement

  • Supply agreement

  • Service agreement

  • Others

Letter of offer

  • Employment letter

  • Trainee letter

  • Addendum to contract

  • Employee Share Option Scheme (ESOS) letter

  • Letter of Undertaking (LOU) or Letter of Bond

  • Others

Contracts

  • Contract or subcontract agreement

  • Independent contractor agreement or freelancer agreement

  • Others

Business partnership agreement

  • General partnership

  • Limited partnership

  • Limited liability partnership (LLP) agreement

  • Project partnership or joint venture agreement

  • Others

Financial arrangements

  • Advances to or from directors, shareholders, or related companies

  • Any other formal or informal agreement involving money or obligations

Why SME owners must pay attention

Many SME owners assume stamp duty is a small issue. It is not.
We often see business owners sign agreements without realising these need to be stamped. Some believe a PDF or e-signature avoids the need. Others assume that no lawyer means no stamp duty. All wrong.

LHDN’s position is simple. If a document falls under the First Schedule of the Stamp Act, it must be stamped regardless of format or who drafted it.

And the penalty? Up to three times the original duty.

What you should do now

If you have signed agreements in the last few years, now is the time to act. Do not wait for an audit notice. Once LHDN calls, your options shrink, and your penalties grow.

At KTP, we help SMEs:

  1. Identify which documents must be stamped under the law

  2. Review existing contracts and spot any compliance gaps

  3. Liaise with LHDN to manage and negotiate penalties if needed

  4. Implement procedures to ensure all future documents are stamped on time

Practical steps for SMEs

  • List all agreements signed in the last three years. Include physical and digital formats.

  • Check each one against the Stamp Act to see if duty applies.

  • Stamp overdue documents immediately. While penalties apply, earlier disclosure often reduces the fine.

  • Assign responsibility to a staff member or department to manage stamping going forward.

  • Use a checklist before signing any agreement — ask “Does this require stamp duty?” before execution.

The final word

Stamp duty audits are no longer rare. SMEs are no longer invisible. Ignorance will not save you from penalties.

If your business has employment contracts, partnership agreements, service contracts, or any formal arrangement involving obligations or money, it is your legal responsibility to ensure they are stamped within the deadline.

The saga over employment contracts may be settled, but a new chapter has begun. The audit era is here. Those who prepare will get through it with minimal cost and disruption. Those who ignore it may pay a heavy price, not just in money, but in lost time, stress, and damaged credibility.

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