Refresher: IRB’s position on stamp duty for employment contracts
To recap, the IRB, in its Media Statement, announced the following:
- Employment contracts entered into before 1 January 2025 are exempt from stamp duty, and no penalties will be imposed for late stamping.
- Employment contracts entered into between 1 January 2025 until 31 December 2025 are subject to stamp duty. Late stamping penalties will be remitted (i.e., no penalties will be imposed for late stamping), provided the contracts are stamped on/before 31 December 2025.
- Employment contracts entered into from 1 January 2026 onwards will be subject to stamp duty, and any late stamping will incur the relevant late stamping penalties.
For further details, please refer to our client alert titled “Stamp Duty: Employment Contracts in Focus”, accessible via this link.
Key takeaways from the FAQs
Employment instruments subject to stamp duty
The IRB, through its FAQs, has provided some clarification on the instruments that would be considered as, or part of, employment contracts, and which are subject to stamp duty. The following summary outlines the key categories of documents required to be stamped:
All employment contracts must be stamped, regardless of whether they are for a temporary, short-term, part-time, or contract-based role. The FAQs also set out criteria which will be considered by the IRB in determining if an instrument is an employment contract.
- Renewals of employment contracts
Each renewal of an employment contract is treated as a new and separate instrument, and must therefore be stamped accordingly.
If an offer letter is the sole document establishing the employer-employee relationship (and is not followed with an employment contract), such offer letter qualifies as an employment contract and is subject to stamp duty.
- Trainee or internship offer letters
Where an offer letter to a trainee (e.g., an intern engaged for 3–6 months and compensated only through an allowance) creates an employer-employee relationship, it qualifies as an employment contract and must be stamped.
- Addenda and supplementary documents
Any addendum or supplementary document to an offer letter, which is signed by both the employer and the employee, are additionally subject to stamp duty.
Party responsible for payment of stamp duty
- The party who is required to pay the stamp duty in relation to an employment contract is the first party who signs the contract. Given that the employer most commonly signs the employment contract first, the employer would have to bear the stamp duty.
Applicable rate of stamp duty
- Each employment-related instrument is assessed based on its substance, rather than its title. If the content of the instrument establishes an employer-employee relationship (i.e., a relationship of master and servant), it will be treated as an employment contract or agreement. In such cases, the applicable stamp duty is RM10 per original copy, in accordance with Item 4 of the First Schedule of the Stamp Act 1949.
- If the instrument does not fall under Item 4 of the First Schedule of the Stamp Act 1949, it is treated as a service agreement in accordance with Item 22 (1)(a) of the First Schedule of the Stamp Act 1949, and the instrument will subject to an ad valorem stamp duty based on the value stipulated in the instrument.
- Additionally, a duplicate instrument is subject to a stamp duty of RM10, provided that the original instrument has been duly stamped.
Certificate of exemption
Furthermore, the IRB affirmed that an employment contract entered into before 1 January 2025, which is exempted from stamp duty, may be submitted to the IRB for assessment and endorsement — at no additional cost — in order to obtain a certificate of stamp duty exemption.
Remittance of late stamping penalties
The remittance of late stamping penalties for employment contracts executed between 1 January 2025 and 31 December 2025 will be processed automatically through the IRB's Stamp Assessment and Payment System ("STAMPS").
Next steps
In light of the IRB's latest guidance, employers should take steps to ensure full compliance with stamp duty requirements. While these FAQs provide some level of guidance, there is still uncertainty surrounding the IRB’s position on other employment-related agreements, and if any remittance of late stamping penalties will be provided for such agreements entered into pre-1 January 2025.
It should be noted that the FAQs merely provide an indication of IRB's views as to how it would stamp such employment-related documents. Ultimately, it would be prudent for employers to obtain legal advice in the event of any uncertainties of the stamping obligations or stamp duty liabilities arising from agreements or documents executed. Employers should also assess the extent of their unstamped employment-related agreements and seek legal advice to determine their legal obligations and risks.
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Shernia Kong and Tan Wen Ying, both Legal Assistants, have contributed to this legal update.
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