Contract Stamping in Malaysia: A Complete Guide for HR & Employees
Signing an employment contract is a standard part of starting a new job. But in Malaysia, there’s another crucial step: contract stamping. While previously considered just a best practice, this process is now more important than ever.
An important change is coming: starting from 2026, it will be compulsory to stamp all contracts in Malaysia.
This guide will walk you through everything you need to know about contract stamping. We will cover what it is, why it’s legally vital, and how the upcoming mandatory requirement will affect employers and employees.
What is Contract Stamping?
Contract stamping is the process of applying a tax, known as stamp duty, on a legal document. This is done by the Lembaga Hasil Dalam Negeri (LHDN), or the Inland Revenue Board of Malaysia.
Essentially, when a contract is stamped, it receives an official stamp or a certificate from LHDN. This acts as proof that the required duty has been paid. It is important to understand that this process is different from a simple signature or a company chop. The stamp is an official government endorsement that gives the document its legal power and, soon, its legal compliance.
Why is Stamping Your Employment Contract Crucial in Malaysia?
The single most important reason for stamping an employment contract is legal validity.
Under current Malaysian law, an unstamped or improperly stamped document cannot be presented as evidence in a court of law. Imagine a dispute over unpaid salary or an unfair dismissal. If your employment contract is not stamped, a judge may refuse to even look at it. This severely weakens your case.
With the new rule in 2026, stamping will move from being a procedural necessity for court to a fundamental legal obligation. It formalizes the agreement and ensures the terms are not only enforceable but also compliant with national law.
Is It Compulsory to Stamp an Employment Contract in Malaysia?
Yes, it will be. This is the most significant change affecting all businesses and employees in Malaysia. Here is a breakdown of the current situation and what to expect.
Current Law (Until End of 2025)
Currently, it is not “compulsory” in the sense that you will be penalized for simply not stamping a contract. The primary consequence, as stated in the Malaysian Stamp Act 1949, is that an unstamped contract is unenforceable in court. This makes it a high-risk practice, but not illegal.
New Compulsory Stamping Rule (From 2026)
Starting in 2026, the rules will change. Stamping will become mandatory for all contracts. Failure to do so will likely result in penalties, not just inadmissibility in court. This policy shift aims to formalize all agreements and ensure tax compliance. All companies must prepare to make this a standard, non-negotiable step in their hiring process. This makes proper documentation a critical part of HR and business compliance.
A Guide to the Contract Stamping Process in Malaysia
The stamping process is straightforward. Getting familiar with it now will ensure a smooth transition when the new rule takes effect.
When Should a Contract Be Stamped?
According to the Stamp Act 1949, a contract should be stamped within 30 days of its execution (the date it was signed). This deadline is expected to be strictly enforced under the new regulations.
Who is Responsible for Paying the Stamp Duty?
For employment contracts, the employer typically bears the cost of the stamp duty. This is part of the administrative cost of hiring a new employee and will continue to be the standard practice.
Calculating the Cost of Stamp Duty for Employment Contracts
Fortunately, the stamp duty for a standard employment contract is not expensive. It is charged at a nominal flat rate.
| Document Type | Stamp Duty Rate |
|---|---|
| Employment Contract (Original) | RM10.00 |
| Employment Contract (Duplicate/Copy) | RM10.00 |
This fixed rate makes it an affordable step for complete legal compliance.
How to Get the Contract Stamped: Online vs. In-Person
You have two main options for getting your documents stamped.
Method 1: Online via the LHDN STAMPS Portal
The easiest and most convenient method is through the LHDN STAMPS portal.
- Register: First, create an account on the STAMPS website.
- Apply: Fill in the necessary details about the contract and upload a digital copy.
- Payment: Pay the RM10 stamp duty online via FPX.
- Receive Certificate: Once payment is confirmed, you can download the stamp certificate to be attached to the contract.
Method 2: In-Person at a LHDN Counter
You can also visit any LHDN branch.
- Prepare Documents: Bring the original signed employment contract and a copy.
- Fill Form: Complete the stamping application form (PDS 1).
- Submit & Pay: Present your documents at the counter and pay the RM10 duty. The LHDN officer will apply a physical stamp.
Conclusion
Contract stamping in Malaysia is evolving from a best practice to a legal necessity. With the mandatory stamping requirement starting in 2026, both employers and employees must treat it as a critical part of the employment process.
For HR managers, now is the time to update your onboarding checklists and ensure all employment contract key terms are stamped without fail. For employees, this change provides greater security, ensuring your rights are protected by a fully compliant and enforceable document. Start preparing now to ensure you are ready for this important legal change.
Frequently Asked Questions (FAQ)
Q1: What is the main purpose of stamping a document in Malaysia?
A: Its main purpose is to give a document legal validity. Currently, it makes it admissible in court. From 2026, it will also be a mandatory step for legal compliance, likely with penalties for failure to do so.
Q2: Can I stamp a contract after the 30-day deadline?
A: Yes, but a penalty for late stamping will be imposed. With stamping becoming compulsory, these penalties are expected to be strictly enforced. It is best to always stamp within the 30-day period.
Q3: Is it true that contract stamping will be mandatory soon?
A: Yes. The Malaysian government has indicated that all contracts will need to be stamped starting from 2026. Businesses should prepare now to comply with this new regulation.
Q4: What happens now if my contract is unstamped?
A: Currently (before 2026), an unstamped contract is considered valid but cannot be used as evidence in court until the duty and any penalties are paid. From 2026 onwards, an unstamped contract will also mean you are non-compliant with the law.