On June 6, 2025, the Inland Revenue Board of Malaysia (LHDN) released a crucial media statement regarding the stamping of employment contracts. Following a decision by the Ministry of Finance, special conditions and exemptions for the RM10 stamp duty on employment contracts have been announced. This update affects nearly every employer in Malaysia, and understanding these new timelines is essential to ensure compliance and avoid unnecessary penalties.

According to the LHDN, nationwide stamp duty audits began in 2025. A major finding from these audits was that a high volume of employment contracts between employers and employees were not stamped with the required RM10 duty, as stipulated under Item 4, First Schedule of the Stamp Act 1949. Recognizing that this is a new audit finding and to ease the compliance burden on employers, the government has provided this important, time-sensitive relief measure.

The Three Scenarios You Need to Know

The new conditions are broken down into three distinct time periods based on when the employment contract was finalized. Here’s what every employer needs to understand:

1. Contracts Finalized Before January 1, 2025

If your employment contract was concluded before this date, you are in the clear.

• ✓ Complete Exemption: The RM10 stamp duty is fully exempted.
• ✓ Penalty Waived: Any penalty for late stamping is also waived (remitted).

2. Contracts Finalized Between January 1, 2025, and December 31, 2025

This is the most critical period requiring immediate attention from employers.

• § Stamp Duty Required: These contracts are subject to the RM10 stamp duty.
• ! Penalty Waived (with a condition): The penalty for late stamping will be waived only if the contract is stamped on or before December 31, 2025.

3. Contracts Finalized On or After January 1, 2026

From this date onwards, the standard rules apply with no exceptions.

• § Stamp Duty Required: The RM10 stamp duty must be paid.
• ! Penalties Enforced: Any delay in stamping these contracts will be subject to penalties as per the Stamp Act 1949.

What This Means for Your Business: An Action Plan

LHDN requires all employers to review their documents to ensure compliance. Here’s a simple action plan:

1. Review Past Contracts: While contracts signed before 2025 are exempt, it’s good practice to ensure your records are complete.
2. Act Now on 2025 Contracts: This is the most urgent task. Identify all employment contracts finalized this year and get them stamped immediately to take advantage of the penalty waiver before the December 31, 2025 deadline.
3. Implement a New Stamping Policy: Ensure a process is in place so that all new contracts from January 1, 2026, are stamped within the legally required timeframe.

Need Help Navigating These Changes?

Managing compliance deadlines on top of your daily operations can be challenging. At SMONE, we help our clients stay ahead of regulatory changes like this. We can assist you in reviewing your employment contracts and managing the stamping process to ensure you remain fully compliant and avoid any future penalties.

Contact us today to learn how we can bring you peace of mind.

(Disclaimer)

This article is for general informational purposes and summarizes the LHDN media statement dated June 6, 2025. It does not constitute legal or tax advice. Please consult with a professional for advice tailored to your specific situation.