From 1 January 2026, all employment contracts finalised in Malaysia will be subject to mandatory stamp duty, with late compliance triggering penalties. The Inland Revenue Board (IRB) made this clear in a recent statement, confirming that enforcement will kick in as part of a broader shift toward a self-assessment model for stamping, introduced under Budget 2025.

This is no minor tweak to administrative procedures. It’s a significant compliance obligation that employers, particularly those with large workforces, must start preparing for now – or risk being caught on the back foot.

Stamp duty rules: A phased approach

The IRB’s announcement outlines a phased rollout designed to ease businesses into compliance. Here’s the breakdown:

• Contracts signed before 1 January 2025 are exempt from stamp duty and penalties.
• Contracts finalised between 1 January and 31 December 2025 are subject to stamp duty but will not incur penalties – as long as they’re stamped on or before 31 December 2025.
• From 1 January 2026 onwards, full enforcement takes effect. All employment contracts must be stamped, and delays will result in penalties.

The applicable duty is a fixed RM10 per employment contract, as set out under Item 4, First Schedule of the Stamp Act 1949. This nominal amount may seem insignificant, but failure to comply could lead to enforcement headaches and financial consequences down the line.

The IRB has made it clear: “All employers are required to review and update all contract documents payroll that has been and will be signed to ensure compliance against the stamping requirements under the Stamp Act 1949.”

Why the clampdown?

This isn’t a move pulled out of a bureaucratic hat. The IRB’s decision stems from audit activities and compliance operations conducted nationwide since the start of the year. These exercises revealed widespread lapses: many employers were unaware or negligent in stamping employment agreements as required by law.

It’s not just about ticking boxes. Stamping employment contracts confers legal validity in disputes and ensures that both parties are on a firmer footing. By shifting to a Stamp Duty Self-Assessment System (STSDS), Malaysia is aligning with global norms, where compliance becomes the taxpayer’s responsibility – not the government’s burden to chase.

Industry response: Calls for clarity and digital ease

The Chartered Tax Institute of Malaysia (CTIM) has weighed in, flagging practical challenges that come with the self-assessment model – especially for larger organisations juggling thousands of employment documents.

CTIM president Soh Lian Seng said, “In recent dialogues with the IRB, the CTIM has sought clarification on several key issues such as whether bulk submissions will be allowed for high-volume documents and how to handle agreements with multiple components such as service and goods provisions.”

Among the concerns raised:

• Will the IRB allow bulk stamping to ease processing for large employers?
• What about informal agreements, such as intercompany invoices that aren't formalised in contract form – do these attract duty?
• Can voluntary disclosures shield companies from penalties for past oversights?

Soh also recommended that Malaysia look to Singapore for inspiration.

“Other recommendations include modelling digital transformation after Singapore’s e-Stamping system to streamline compliance,” he noted, adding that robust stakeholder engagement is crucial to make the reforms “practical and equitable.”

The clock is ticking

Although full enforcement is only set for 2026, businesses have just over six months to get their house in order. The 2025 grace period is a strategic window – a rare chance for organisations to rectify non-compliance without fear of penalty. Those who fail to take advantage of it may find themselves paying the price, both literally and reputationally.

For HR and payroll leaders, this is the time to audit your employment records, work with legal and tax advisors, and set up systems to ensure that new hires from 2025 onwards have stamped agreements. Contracts often live in different corners of the organisation – with HR, with legal, with finance – so pulling them together may be no small feat.

A quiet but consequential reform

On the surface, a RM10 duty may seem trivial – hardly worth a boardroom conversation. But the implications of non-compliance could ripple through hiring practices, audits, and employee disputes. This is more than just rubber-stamping; it’s about embedding compliance in the DNA of employment processes.

If Malaysia gets this right, it won’t just close a revenue gap. It will raise the standard of employment governance across the board. But if employers snooze on this, they may soon find themselves stamping more than just paper – they’ll be stamping out fires.