On 6 June 2025, the Malaysian Inland Revenue Board announced that all employment contracts executed from 1 January 2025 onwards will be subject to mandatory stamp duty. This development marks a shift in compliance expectations and introduces new timelines and penalties that employers must be aware of to avoid financial and regulatory repercussions.
Mandatory Stamping
In line with the phased implementation of the Stamp Duty Self-Assessment System outlined in the 2025 Budget, the Malaysian Inland Revenue Board (IRB) announced on 6 June 2025 that from 1 January 2025 onwards all employment contracts executed between employers and employees will be subject to mandatory stamp duty, as follows:
- All employment contracts executed before 1 January 2025 are fully exempt from stamp duty and late penalties;
- All employment contracts executed between 1 January 2025 and 31 December 2025 are subject to stamp duty. However, a remission of late stamping penalties will be granted, provided that the employment contracts are stamped on or before 31 December 2025.
- From 1 January 2026 onwards, all employment contracts must be stamped within 30 days from the date of signing (if signed in Malaysia) or within 30 days from the date received in Malaysia (if signed abroad).
Presently, the cost for stamping is RM 10 per original copy of the contract, provided that the contract is stamped within the prescribed period (ie, 30 days from the date of signing (if signed in Malaysia) or within 30 days from the date received in Malaysia (if signed abroad)).
Consequences of non-compliance
Penalties for late stamping are:
- If stamped within 3 months from the prescribed period: RM 50 or 10% of the stamp duty (whichever is higher)
- If stamped after 3 months from the prescribed period: RM 100 or 20% of the stamp duty (whichever is higher)
Additionally, a finding of non-compliance exposes employers to the imposition of penalties, including but not limited to a penalty of RM 1,500 for executing and signing documents not duly stamped.
Key Takeaways
In light of the Inland Revenue Board's implementation of mandatory stamp duty on employment contracts effective from 1 January 2025, employers should review their onboarding procedures, including document execution workflows, and ensure that HR employees have received appropriate training to ensure compliance with the new stamping requirements going forward.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
