Stamping Act Re 1

Stamp Duty Act 1949

Latest Updates by LHDN

Employment Agreements

Employment Agreement – For those employed from 1 January 2025 the agreement must be stamped before 31 December 2025. The stamping charges have been fixed at RM10.00

Contract For Services

All agreements which are ‘contract for service’ in nature. The stamping charge will be based on the value of the contract.

Tenancy and Lease Agreements

All tenancy agreements and agreements to lease or hire movable property. The stamping charge will be based on the annual value of the contract.

Agency Agreements

All agency agreements including dealerships and distributorships agreements involving a tenure and a fee. The stamping charge will depend on the nature of agreement and is subject to assessment by LHDN.

Decoding the Stamp Act 1949: What Every Business Must Know About the Latest Updates

A New Era of Compliance: The Stamping Act 1949 is Evolving, and So Must Your Business.

For decades, stamp duty may have felt like a minor administrative box to tick. However, significant and recent amendments to the Stamp Act 1949 are completely shifting the landscape. These changes aren’t just for lawyers and tax consultants; they directly impact your operational costs, compliance risks, and how you manage key business agreements.

From the introduction of a game-changing Self-Assessment Regime to broadened compliance powers for the authorities, ignorance is no longer a viable strategy. As business owners, directors, HR managers, and financial consultants, understanding these updates is critical to protecting your company and ensuring legal validity for your most important documents.

The Game Changer: Self-Assessment for Stamp Duty

The most critical update is the transition to a Stamp Duty Self-Assessment System (STSDS), effective in phases starting from January 1, 2026. This moves the responsibility of correctly calculating and paying stamp duty squarely onto the taxpayer.

Close-up of hand writing in notebook using a blue pen, focus on creativity.

Key Impacts of the Self-Assessment Regime:

1. Your Responsibility is Absolute:

You must now independently assess, calculate, and pay the correct stamp duty for all dutiable instruments. This replaces the old system where the Inland Revenue Board (IRB) determined the amount.

2. Mandatory Electronic Filing:

Taxpayers are obligated to electronically file their stamp duty returns, along with the executed instrument, through the prescribed online system.

3. Deemed Assessment:

Once the return is filed and payment is made, the Collector is deemed to have made an assessment. However, the Collector retains the right to later conduct an audit or adjudication.

4. Increased Audit Scrutiny:

The IRB is expected to conduct more frequent and in-depth stamp duty audits, similar to the income tax regime.

5. Time Limit for Reassessment:

The Collector can issue an assessment or additional assessment within five (5) years from the date the duty was paid if the original assessment was found to be insufficient. This time limit is removed in cases of fraud, willful default, or negligence.

6. Relief for Overpayment:

You can apply for a refund of excessively paid duty within 24 months of the stamp duty return being filed.

Area
Former Requirement
New/Updated Requirement
Mandatory Stamping
Generally required for instruments to be used in court or acted upon by public officers.
All dutiable instruments must now be stamped, regardless of the duty amount. This includes inter-company transactions like loan, service, and employment agreements.
Timeframe for Stamping
Generally 30 days from execution (in Malaysia) or receipt (executed abroad).
Remains 30 days. Instruments executed abroad and received electronically (e.g., via email) are deemed received from the date of the first receipt.
Penalty for Late Stamping (Within 3 Months)
Varies, generally lower.
RM50.00 or 10% of the deficient duty, whichever is greater.
Penalty for Late Stamping (After 3 Months)
Varies, generally lower.
RM100.00 or 20% of the deficient duty, whichever is greater.
Record Keeping
Informal.
Taxpayers must maintain stamped instruments and relevant documentation for seven (7) years from the date of duty payment.

What Must Be Stamped? Dutiable Instruments

Stamp duty is levied on the instrument (the written document), not the transaction itself. Instruments are generally classified under Ad Valorem Duty (duty based on value) or Fixed Duty (a set amount, e.g., RM10).

Instruments Where Stamp Duty is Mandatory (Examples from the First Schedule of the Stamp Act 1949):

transfer of property

Transfer of Property

Conveyance/Transfer of immovable property (land, buildings) and marketable securities (e.g., shares in a company).

security documents

Security Documents

Loan Agreements, Bonds, Mortgages, Debentures, and Guarantees.

agreement creating int

Agreements Creating Interests

Leases, Tenancy Agreements, and Agreements for Sale.

comm agreements

Commercial Agreements

Certain Service Agreements, Partnership Agreements, and even Employment Contracts.

cap market

Capital Market

Contract Notes (e.g., for share purchases).

Key Consideration: The content and substance of the document, not its title (e.g., “Letter of Understanding”), determine if duty is chargeable.

Areas of Exemption and Relief

Not all documents are subject to stamp duty. Understanding the available exemptions and reliefs can lead to significant cost savings, particularly during corporate restructuring.

Common Exemptions and Reliefs:

Type
Description
General Exemption
Certain instruments are listed in the First Schedule as being generally exempt (e.g., specific receipts, certain short-term bills of exchange).
Ministerial Exemption/Remission
Exemptions or a reduction in the rate of duty (remission) granted by the Minister of Finance through Gazette Orders, often for specific economic or social initiatives (e.g., housing schemes, specific SME-related financing).
Relief under Section 15
Relief from stamp duty for the transfer of an undertaking or shares under a scheme of reconstruction or amalgamation of companies (subject to strict conditions like a minimum 90% share-for-share consideration).
Relief under Section 15A
Relief for the transfer of property or shares between associated companies (i.e., minimum 90% common ownership) to achieve greater efficiency in operation (subject to a 3-year holding period embargo).
Transfer to Family
Exemptions or remissions are often granted for the voluntary transfer of immovable property between certain family members (e.g., parent to child, grandparent to grandchild) for the first portion of the property value.

Action Points for Business Decision Makers

The transition to a self-assessment regime transforms stamp duty from an administrative task into a core compliance responsibility. It’s time to act decisively:

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1. Compliance Review

Conduct an immediate review of all current and historical agreements to identify any unstamped or insufficiently stamped instruments.

2. Training & SOPs:

Train your accounting, finance, legal, and HR teams on the new self-assessment process, including how to correctly classify documents and calculate duty.

3. Digital Integration

Prepare for the electronic submission process via the STAMPS system.

4. Documentation

Ensure all dutiable instruments—including internal loan agreements, employment contracts, and service agreements—are meticulously documented and stamped within the 30-day window to avoid severe penalties.

The future of stamp duty is compliance by design. Be proactive to turn this challenge into a competitive advantage.

For more information: https://www.hasil.gov.my/en/stamp-duty/

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