The Stamp Act, 1949, (“the Act”) mandates instruments listed in the First Schedule of the Act to be stamped. In line with this, employment contracts, which are written documents under the Act, fall within the scope of this provision and are therefore subject to a flat stamp duty of RM10 per contract. Employment contracts were not generally stamped in the past largely due to practical and commercial reasons. However, recent enforcement activities conducted by the Malaysian tax authority revealed that the majority of the employment contracts concluded between employers and employees had not been stamped in accordance with the requirements of the Act. In this respect, given the volume of employment contracts involved and to avoid further burdening employers, the Ministry of Finance (“MoF”) has announced that only employment contracts executed after 1 January 2025 will be subjected to stamp duties. Remission of penalties will only apply if employment contracts executed in 2025 are stamped by 31 December 2025.
Under Section 4 of the Stamp Act, 1949, instruments which are liable to stamp duties are listed in the First Schedule of the Act. Stamp duty liability arises on an instrument when it is either:
This includes legal, financial and commercial written documents and the rate of duty varies according to the nature of the instruments and the considerations stipulated in the instruments or the market value of the property.
Under Item 4, First Schedule, Stamp Act 1949, formal employment contracts are subject to stamp duty at a flat rate of RM10 per contract payable 30 days after the signing of the contract. Stamping of employment contracts was not common in the past for practical and commercial reasons. For example, the legal implication for non-stamping would arise only on the occasion of the document being required to be admitted as evidence in court proceedings.
Following the 2025 Budget announcement by the Government on the implementation of the Self Assessment System for Stamp Duty (“STSDS”), which will be rolled out in phases starting 1 January 2026, the Malaysian Inland Revenue Board (“MIRB”) issued the Stamp Duty Audit Framework (“RKADS”) on 1 January 2025 that details the process and conduct of stamp duty audit by the MIRB. With the framework, the MIRB commenced stamp duty audit activities nationwide and discovered that employment contract documents between employers and employees were generally not stamped as required under Item 4, First Schedule, Stamp Act 1949, where the prescribed stamp duty is RM10.
In consideration of the volume of employment contracts involved, on 6 June 2025, the MoF issued the following directive:
| Execution date of employment contract | Stamp duty | Late stamping penalty | Provisions under the stamp duty act 1949 (legal basis) |
| Before 1 January 2025 | Exempted | Remission of late stamping penalty | Section 80(1A)& 47A(2) |
| 1 January 2025 -31 December 2025 | Applicable | Remission of late stamping penalty, if stamped on or before 31 December 2025 | Section 47A(2) |
| On or after 1 January 2026 | Applicable | Penalty for any delay in stamping as follows:
| Standard provisions under Section 47A(1) |
The original press release from the MIRB in Bahasa Malaysia can be found here.
Actions to be taken by all employers
With the above announcement, Malaysian employers are expected to review all employment contracts that have been executed from 1 January 2025 to ensure compliance with the stamping requirements under the Stamp Act 1949 by 31 December 2025. Additionally, all employment contracts executed on or after 1 January 2026 will have to be stamped within 30 days of signing to avoid the imposition of penalty as shown in the above table.
From a workforce and global mobility perspective, instruments which are subject to stamp duty liability could be wider than just employment contracts that are required to be stamped for work permit application purposes with the immigration authorities. This could include amongst others:
With the implementation of the Self-Assessment System for Stamp Duty (“STSDS”) in 2026 and ongoing enforcement efforts, Malaysian organizations should work closely with their respective legal counsels to carefully review and assess the potential implications of stamp duty on all workforce and global mobility-related documents to ensure continued compliance. Furthermore, organizations should evaluate the potential impact on transaction costs and potential penalties for non-compliance associated with workforce arrangements and the mobilization of talent to and from Malaysia.
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Hilda Liow
Partner
Lim Phing Phing
Partner
Wee Lay Har
Director
Loh Zi-Lynn
Senior Manager
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