Do We Need to Stamp Employment Contracts?

Employment contracts are a key document that sets out the terms of engagement between employer and employee. While many companies prepare and sign these contracts diligently, a frequent question that arises include: Do employment contracts need to be stamped in Malaysia? 

Stamping is the process of paying stamp duty to the Inland Revenue Board of Malaysia (LHDN) to officially validate certain legal documents, including contracts and agreements. Once stamped, the document is endorsed with a stamp (either physical or electronic), confirming that the appropriate duty has been paid.

In Malaysia, stamping is governed by the Stamp Act 1949.

Yes, under the Stamp Act 1949, an employment contract is classified as an instrument chargeable with stamp duty if it falls within the categories listed under Schedule 1. LHDN has recently clarified that:

·  The requirement applies to all contracts that fall under chargeable instruments, regardless of the nationality of the parties involved.

·        The duty is calculated based on the date of the contract, not the date of stamping.

·        The employer is responsible for stamping and any associated penalties, not the employee.

Even though the stamp duty is minimal, stamping offers significant benefits:

·        Legal Admissibility in Court
An unstamped contract may not be admitted as evidence in court until the proper stamp duty (plus penalty) is paid.

·        Proof of Execution Date
Stamping acts as official validation of when the contract was signed.

·        Good HR Governance
Stamping is a best practice for formalizing employment relationships and avoiding compliance issues later.

·        RM10 for each copy of the employment contract (usually applied to duplicate copies).

·        No additional duty applies unless the contract includes other chargeable elements such as loans or tenancy terms.

Stamping should be done within 30 days from the date the contract is signed. If you miss this window, penalties will apply based on the length of the delay.

Delay After Signing	Penalty
Within 30 days	No penalty, just pay RM10 stamp duty
31 days to 3 months	RM50 or 10% of the stamp duty, whichever is higher
More than 3 months	RM100 or 20% of the stamp duty, whichever is higher
These penalties are in accordance with Section 47A of the Stamp Act 1949.

But over decades IRB has hardly enforced this Act. Now, suddenly it has woken up to a new source of revenue! LHDN should only consider stamping of documents going forward and not retrospectively. If revenue is the issue, there are better ways of securing it.

 

Reference:

Stamping of Employment Contracts in Malaysia: Is It Required? CentralHR, 24 April 2025