Stamp duty imposed on employment contracts

Recently, LHDN introduced the Stamp Duty Audit Framework which came into effect on 1 January 2025. This Framework retrospectively covers a period of three years, from 1 January 2022 to 31 December 2024.

This Framework brought into sharp focus a little known requirement for employment contracts to be subject to stamp duty of RM10 per contract. This was imposed under item 4 of the First Schedule of the Stamp Act 1949.

This was of concern because under the Framework, all employment contracts executed between 2022 to 2024 may be subject to review, and with that, penalties for non compliance.

Thankfully there is now some clarity to that position. By a media release earlier today, LHDN has now clarified that:

1. For employment contracts executed before 1st January 2025, stamp duty is exempted.

2. For employment contracts executed within 2025, stamp duty is imposed BUT late penalty is remitted if stamped before end of 2025.

3. As a result, the imposition of stamp duty (and the resulting penalties on non compliance) will only affect employment contracts executed from 2026 onwards.

Employers can now rest easy and not worry about potential past transgressions.

See LHDN press release:

https://tinyurl.com/5bdyj8f7