Running a small or medium enterprise (SME) is already a balancing act—between growth, compliance, and people. Yet, one overlooked detail can trigger unnecessary risk: stamp duty on official documents, especially employment contracts.

Many founders and HR managers assume employment letters are “just paperwork.” In reality, they are legal instruments that require stamping under Malaysia’s Stamp Act. Missing this step can lead to financial penalties, compliance risks, and reputational damage.

📌 Stamp Duty in Malaysia: Definition & Scope

• A tax imposed on legal documents to make them enforceable in court.

• Applies to agreements such as employment contracts, service agreements, tenancy agreements, and share transfers.

• Paid to Lembaga Hasil Dalam Negeri (LHDN), usually within 30 days of execution.

⚠️ Critical Deadlines & Penalties to Avoid (2025/2026)

• Employment contracts signed before 1 January 2025 are exempt from stamp duty.

• CRITICAL NOTE: Employment contracts signed in 2025 must be stamped by 31 December 2025 to qualify for the penalty waiver. Penalties will apply immediately for contracts signed from 1 January 2026 onwards if not stamped within 30 days.

• From 1 January 2026 onwards, all employment contracts must be stamped within 30 days of signing, with penalties applying for late compliance.

• Risk of penalties: Late stamping can incur fines and jeopardize enforceability.

• Audit exposure: LHDN has tightened compliance checks, especially for employers.

🧩 6-Step Guide: How SMEs & HR Must Stamp Employment Contracts

1. Identify documents → Employment letters, service agreements, tenancy contracts.

2. Classify by stamp duty category → Fixed duty (e.g., employment letters) vs. ad valorem duty (based on value, e.g., loan agreements).

3. Calculate payable duty → For employment contracts, the Fixed Duty is currently RM10 per document. Refer to LHDN’s schedule for other document types.

4. Submit for stamping → Via LHDN’s STAMPS portal or at branch counters. Remember: a 30‑day grace period applies from the date the contract is signed.

5. Record & archive → Keep stamped copies for HR audits and legal defense.

6. Review annually → Update compliance workflows as LHDN issues new directives.

Call-to-Action

• Founders, don’t let compliance slip through the cracks. Audit your HR letters today.

• HR leaders, ensure every employment contract is stamped—protect your company and your people.

💡 Reminder for HR Teams

Stamp duty is not just a finance issue—it’s a people and compliance issue. Every employment letter represents trust between employer and employee. Stamping ensures that trust is legally recognized and enforceable.

At the heart of every SME is resilience and trust. By honoring compliance obligations like stamp duty, founders and HR leaders safeguard not just their businesses, but also the confidence of their teams.

Compliance builds credibility. Credibility builds growth. Growth builds legacy.

📚 References & Further Reading

• LHDN: Stamp Duty Changes, Risk & Compliance – Employer Stamping of Employment Contracts (PDF)

• FMM Announcement: Exemption of Stamp Duty on Employment Contracts Executed Before 1 January 2025

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