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Clarification on Stamping of Employment Contracts under the Stamp Act 1949
The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) wishes to inform members of the latest clarification on the stamping of employment contracts, following the Inland Revenue Board of Malaysia (LHDNM)’s implementation of the Stamp Duty Audit Framework on 1 January 2025.
I. Transition to Self-Assessment
> The implementation of the Stamp Duty Audit Framework represents a shift from formal assessment to self-assessment.
> This move is part of an education and compliance initiative to increase voluntary compliance.
> LHDNM clarified that its primary objective is to encourage compliance, not to penalise.
> The emphasis will be on ensuring that stamping is completed, rather than on imposing penalties.
II. Employment Contracts
Effective Enforcement Date:
> Enforcement of stamping employment contracts applies from 1 January 2025 onward.
> Although audits may cover up to 3 years, enforcement begins from 1 January 2025.
Stamping Requirements:
> All employment contracts or appointment letters must be stamped within 30 days of execution.
> Failure to stamp within 30 days, and if done after 3 months, will result in a penalty of RM100 or 20% of the deficient duty, whichever is higher.
Waiver of Penalties:
> No formal amnesty is provided, but LHDNM may consider waivers on a case-by-case basis.
> For contracts dated from 1 January 2025 onwards:
- Contracts must be stamped within the 30-day period.
- Late stamping will trigger a system-generated penalty.
- Companies may appeal for a waiver through the system.
> For contracts dated before 1 January 2025:
- If still in force, companies are encouraged to stamp these contracts.
- Penalty waivers may also be appealed through the same process.
III. Other Clarifications
The requirement to stamp employment contracts is based on the Stamp Act 1949, regardless of their relevance in court or industrial dispute cases.
> Under the First Schedule, Item 4 of the Stamp Act, employment contracts/appointment letters are considered chargeable instruments, subject to a RM10 duty per instrument.
> This applies to:
- All types of contracts: long-term, short-term, and periodic;
- All categories of workers: local and foreign.
For resigned employees:
> If an employment contract is retained by the employer for specific purposes, it should be stamped.
> If not, such documents should not be included with active contracts.
Documents under review by LHDNM for stamping treatment:
> Offer/acceptance letters for interns, particularly where elements of a legal contract may be absent;
> Master employment contracts for foreign workers, signed between employers and embassies or individuals.
IV. LHDNM State Office Briefings
> All LHDNM State Offices have been briefed on:
- The enforcement date; and
- The approach to penalty waivers under the audit framework.
> For further enquiries:
- Members should first contact their respective State LHDNM offices.
- If unresolved, members may contact the Stamp and RPGT Operations Department, LHDNM Headquarters.
