Legal Update: Stamp Duty Exemption for Pre-2025 Employment Contracts – What Employers Need to Know

10 June 2025 | Messrs. Amir Khusyairi & Associates

The Inland Revenue Board of Malaysia (Lembaga Hasil Dalam Negeri Malaysia, “HASiL”) recently issued a media statement dated 6 June 2025 announcing a key exemption affecting employers nationwide: employment contracts executed before 1 January 2025 will be exempted from stamp duty, in light of the upcoming implementation of the Sistem Taksir Sendiri Duti Setem (STSDS) under Budget 2025.

This exemption arises from audit findings that many employers have not complied with the stamping requirement under Item 4 of the First Schedule of the Stamp Act 1949, which imposes a fixed stamp duty of RM10.00 per employment contract.

 Key Points from HASiL’s Announcement:

1. Exemption for Pre-2025 Contracts
   • Employment contracts finalized before 1 January 2025 are exempted from stamp duty.
   • This is granted under the Minister of Finance’s authority pursuant to Section 80(1A) of the Stamp Act 1949.
   • Any penalties for late stamping will also be remitted, under the authority of the Collector of Stamp Duties per Section 47A(2) of the Act.

1. Contracts Executed in 2025
   • Employment contracts dated 1 January 2025 to 31 December 2025 remain subject to the RM10.00 stamp duty.
   • However, penalties for late stamping will be remitted, provided that the contracts are stamped on or before 31 December 2025.

 

1. Post-2025 Contracts (Effective 1 January 2026)
   • Employment contracts executed on or after 1 January 2026 must be stamped and will be subject to full enforcement, including applicable penalties for late stamping, as part of the STSDS rollout.

 

 

This exemption is a pragmatic measure by the government, recognizing the widespread non-compliance among employers who may have been unaware of the stamping requirement for employment contracts. Importantly, employers should not view this as a blanket waiver going forward—the STSDS regime signals stricter audit enforcement and self-assessment responsibilities beginning in 2026.

 

What employers should do?

1. Immediate Review: Employers should review all existing employment contracts, particularly those dated from 1 January 2025 onwards, to ensure compliance.
2. Regularize 2025 Contracts: For contracts signed in 2025, ensure they are stamped by 31 December 2025 to benefit from penalty remittance.
3. Prepare for STSDS: Begin internal preparations for the STSDS regime. This may include updating HR documentation, implementing internal SOPs for contract execution, and maintaining a stamp duty compliance register.
4. Seek Legal Guidance: Employers with a high volume of employment contracts or historical non-compliance should consult legal counsel to manage risks and navigate the transition effectively.

 

This update is provided for general informational purposes only and does not constitute legal advice. For specific legal advice, please contact us at general@law-aka.com