As a tax agent dealing with many SMEs, I understand the day-to-day struggle by keeping the business afloat, managing staff, and handling compliance with limited resources.

Now, LHDN has added another item to your compliance checklist … employment contract stamping.

A month after the initial announcement, LHDN released an official FAQ on 3 July 2025 to clear the air.

Here’s the reality SMEs need to know:

✔️ It is now compulsory to stamp employment contracts under Section 4(1) of the Stamp Act 1949.
✔️If your contract is not stamped, it cannot be used in court as evidence (Section 52).
✔️This covers more than just typical contracts. Offer letters, appointment letters, fixed-term contracts, renewals, secondments … all fall under this rule.

But many SMEs ask me … what about internal transfer letters, promotion letters, salary increments, bonus letters?

Other key points for SME bosses to note :

✔️Temporary, part-time, or contract worker agreements? Also need to be
stamped.
✔️Every new contract or renewal? Considered a new document and must be stamped.
✔️Offer letter is the only document binding employer and employee? Stamp it.
✔️Interns or trainees receiving allowances? If the relationship resembles employment … stamp it.
✔️Extra documents like IT policies, benefit letters, study sponsorship? If signed by both parties … stamp them too.
✔️Contract not in BM or English? Must have certified translation before stamping.

Deadlines to remember :
✔️Signed in Malaysia … stamp within 30 days
✔️Signed overseas … stamp within 30 days of receiving in Malaysia
Payment due within 14 days after assessment

Stamp duty is RM10 per original copy, but non-compliance is costly :
✔️Late within 3 months … RM50 or 10 percent penalty
✔️More than 3 months late … RM100 or 20 percent penalty

Exemptions and Grace Period :
✔️Contracts finalised before 1 January 2025 : exempt
✔️Contracts signed in 2025 : penalty waived if stamped by 31 December 2025
✔️Contracts from 2026 onwards : full duty and penalties apply

LHDN used the word “boleh” (can) regarding pre-2025 contracts … sounds optional, but better get formal endorsement to avoid future issues.

As a tax agent, I know many SMEs are already stretched thin:
✔️Small HR or admin teams
✔️Limited understanding of LHDN’s expectations
✔️Multiple priorities under tough economic conditions

But ignoring this is risky. Even RM10 stamp duty, if left unchecked, can snowball into penalties and compliance headaches.

Let’s stay ahead of this. Don’t wait for audit letters to panic.

Read the full content in our blog on FAQ on employment contract
https://lnkd.in/grWXNwHH