Malaysia Employment Contract Stamping Guide 2025: Compliance, Penalties & Amnesty

With the Inland Revenue Board of Malaysia (LHDN) enforcing the Stamp Duty Audit Framework effective 1 January 2025, employers must prioritize compliance with stamping requirements for employment contracts. This guide breaks down the latest regulations, penalties and exemptions to help businesses avoid fines and streamline HR processes.

Legal Basis for Stamping Employment Contracts

Under the Stamp Act 1949, all employment contracts (full-time, part-time, fixed-term, and short-term) are classified as chargeable instruments, requiring a RM 10 stamp duty per copy. Exemptions apply only to contracts with monthly wages below RM 300, a threshold unchanged since 1949 and now irrelevant given Malaysia’s minimum wage of RM 1,700.

Key points:

• Local and foreign employees are covered, but internship agreements are exempt as their terms are not yet finalized.
• Stamping must be completed within 30 days of signing to avoid penalties.

Penalties for Late Stamping (Effective 2025)

Delays in stamping contracts trigger escalating fines:

• 31 days to 3 months late: RM 50 or 10% of unpaid duty (whichever is higher).
• Over 3 months late: RM 100 or 20% of unpaid duty (whichever is higher).

Important: Unstamped contracts remain legally valid but are inadmissible as evidence in court until stamped.

LHDN’s Amnesty Program & Transition Period

Following advocacy by industry groups like FMM, LHDN introduced phased penalty waivers:

• Contracts signed between 1 Jan 2022 – 31 Dec 2024: Full stamp duty fees and penalty waiver.
• Contracts signed 1 Jan – 30 April 2025: Penalties apply but can be waived via online appeal.
• Contracts signed 1 May 2025 onward: Strict 30-day deadline; no penalty exemptions.

Note: The online STAMPS system automatically issues fines for late submissions, requiring employers to appeal manually.

Key Compliance Challenges

• LHDN will audit contracts dating back to 1 January 2022, focusing on compliance across industries.
• SMEs and companies with high staff turnover face significant costs and paperwork.
• Unresolved Questions:
  • Whether offer letters and employee handbooks require separate stamping (if they include binding terms).
  • Stamping expired contracts (employers must retain contracts for 7 years under the Employment Act).

Steps to Ensure Compliance

1. 1. Audit Existing Contracts: Review all contracts signed since 2022 and utilize the amnesty period for retroactive stamping710.
2. 2. Automate Reminders: Integrate stamping deadlines into HR systems to avoid missed deadlines.
3. 3. Use the STAMPS Portal: Submit contracts electronically via LHDN’s STAMPS system for faster processing.
4. 4. Training: Attend LHDN roadshows or consult legal advisors for updates on audit requirements.

FAQ

Q: Do digital contracts require stamping?
A: Yes. The law applies to all written agreements, including digital copies.

Q: Who pays the stamp duty?
A: Employers are responsible for costs and penalties.

Q: Can unstamped contracts be used in court?
A: Yes, but only after paying the duty and penalties.

References: LHDN Stamp Duty Guidelines 2025, Stamp Act 1949, FMM Industry Updates