‘Stamp duty for job contracts another burden for businesses'

The Star

2 days ago

PETALING JAYA: Exempting employment contracts from stamp duty would ease unnecessary financial and administrative burdens, say industry players.
They argue the added pressure is especially difficult for businesses, particularly small and medium enterprises (SMEs), already grappling with economic uncertainty and labour shortage.
The appeal comes as the Inland Revenue Board (LHDN) begins actively enforcing stamp duty payments on employment-related documents under the Stamp Duty Audit Framework, effective Jan 1.
Associated Chinese Chambers of Commerce and Industry of Malaysia treasurer-general Datuk Koong Lin Loong said employment contracts should be specifically exempted from stamp duty, similar to what is practised in Singapore and Thailand.
'Employment contracts are a day-to-day matter. This is not a one-off legal document.
'Especially in Malaysia's current situation, where we are already struggling with talent outflow to Singapore and elsewhere, this is not the right time to add another burden,' he said when contacted yesterday.
Koong added that the law, enacted in 1949, is 'very outdated' and should be amended before any enforcement framework is applied.
While the legal requirement to stamp employment contracts has existed under the Stamp Act 1949, it had not been widely practised until now.
Under the Act, employers must stamp all employment contracts – including full-time, part-time, fixed-term and short-term – within 30 days of execution, at a flat rate of RM10 per contract.
However, failure to comply can now trigger a late penalty of up to RM100 per instrument, compounding costs for businesses with high staff turnover or a large workforce.
'The exemption would also remove unnecessary bureaucracy from HR departments, which already have more strategic tasks to focus on,' Koong said.
In Singapore, even letters of appointment are considered non-dutiable, Koong added.
'We need that kind of business-­friendly environment if we want to remain competitive and attract foreign direct investment.'
Echoing this, national president of the Small and Medium Enterprises Association Datuk William Ng criticised the abrupt nature of the enforcement.
'There was insufficient notice, engagement or support from authorities. It feels more punitive than developmental,' he said, adding that the costs would go beyond the RM10 per document.
'The automatic late penalty of up to RM100 per contract means businesses with hundreds of employees, including those hired years ago, are facing a significant retrospective burden.
'HR teams must now comb through old contracts, stamp minor amendments and issue backdated documents. This is overwhelming for small teams,' he said.
Ng proposed either exempting standard employment contracts or implementing a simplified compliance mechanism such as optional stamping unless required in court or a digital self-declaration model for SMEs.
SME Association of Malaysia president Ding Hong Sing said stakeholders should have been consulted first.
'We are already dealing with so much – minimum wage increases, inflation, recruitment challenges. Now this?
'Even if it's a small amount, it adds up fast when you have many staffers. At least inform us before enforcing,' he said.
MCA vice-president and Economic and SME Affairs Committee chairman Datuk Lawrence Low also called for an amnesty period to allow employers to stamp past contracts without penalty.
He warned that the current approach could disrupt business operations, hinder hiring and even affect salaries.
While the stamp duty is legally enforceable under the Act, Low said clearer guidelines and more communication are urgently needed.