Requirement comes amid non-compliance among employers on stamp duty
All employment contracts in Malaysia will need to be stamped starting January 2026, according to the country's Inland Revenue Board (IRB).
The IRB announced that employment contracts finalised starting from January 1, 2026, will be subject to stamp duty, with delays resulting in penalties, Bernama reported.
The mandate comes after the IRB observed non-compliance in stamp duty among employers during its nationwide audit activities and compliance operations since January.
"One of the key findings has been that many employment contract documents between employers and employees have not been stamped as required under Item 4, First Schedule of the Stamp Act 1949, which stipulates a stamp duty of RM10," the IRB said in a statement quoted by Bernama.
Malaysia's Finance Ministry has exempted from stamp duty the employment contracts executed before January 1, 2025.
However, employment contracts finalised between January 1 and December 31 this year will remain subject to stamp duty. Remission of these late stamping penalties will be granted as long as the contracts are stamped on or before the year ends, according to the report.
The mandate is in line with the phased implementation of the Stamp Duty Self-Assessment System, which begins in January 2026. Under the system, the responsibility to ensure that chargeable instruments are stamped with proper duty falls on duty payers, according to KPMG.
The implementation of the self-assessment system comes after many organisations have treated stamp duty as a "compliance afterthought," according to Baker McKenzie.
It noted that the lack of compliance monitoring by the IRB has resulted in companies choosing not to stamp certain documents they deem unlikely to be litigated, such as intercompany agreements.
"Similarly, employment contracts are also frequently left unstamped, largely due to the historical absence of enforcement actions by the IRB," Baker McKenzie said on its website. "However, this position is no longer tenable."
