Stamp duty has become an increasingly prominent topic in Malaysia following the recent transition to the stamp duty self-assessment system (“STSDS”) kicked off in January 2026. In our previous article, we explored key practical insights and common misconceptions about stamp duty in Malaysia (refer to https://dnh.com.my/5-practical-insights-and-common-misconceptions-about-malaysias-stamp-duty-regime/). This article will address 10 frequent questions businesses often encounter.
1. Which instruments are subject to stamp duty?
Stamp duty applies to any written instrument listed under the First Schedule of the Stamp Act 1949 (“SA 1949”). Common chargeable instruments include service agreements, sale and purchase agreements, property transfer instruments, loan agreements and tenancy agreements.
In general, so long as the chargeable instrument is executed within Malaysia, or if executed overseas and subsequently received in Malaysia, it must be stamped after entering Malaysia.
2. Is electronically signed instrument chargeable with stamp duty?
Yes, a “written instrument” under the SA 1949 includes any documents in electronic record or electronically readable form. As such, an agreement signed electronically will carry the same stamp duty obligations as a physically signed document.
3. Who is legally liable to pay stamp duty?
Third Schedule of the SA 1949 sets out a list of parties legally liable to pay stamp duty for specific instruments. The common examples include, the transferee in a property transfer transaction, and a tenant under a lease or tenancy agreement.
In particular, the Third Schedule designates the “obligor” as the party liable to pay stamp duty for instruments such as bonds, service agreements and loan agreements, while for general agreements under Item 4 of First Schedule, the liability falls on the first party who executes the instrument.
4. Are employment contracts and offer letters subject to stamp duty in 2026? Is stamp duty payable for a renewal of a fixed term employment contract?
Yes, employment contracts and offers of employment are chargeable with a flat stamp duty of RM10 under Item 4 of First Schedule. The liability to pay stamp duty falls on the first party signing the agreement, however in practice, employers generally bear the cost.
That said, effective 1 January 2026, any employment agreement with wages not exceeding RM3,000 per month will be exempt from stamp duty pursuant to Section 29 of the Finance Act 2025. This is a significant jump from the old exemption threshold of RM300 only. As such, only employment contracts with monthly salaries above RM3,000 will attract stamp duty now.
As for the renewal of fixed term employment contracts, each renewal letter will be treated as a fresh employment agreement and subject to stamp duty.
5. Is renewal of a tenancy agreement subject to stamp duty?
Yes, tenancy renewal, whether in the form of a formal agreement or simple letter, is subject to stamp duty based on the renewed term and rent, as it creates new binding obligations and agreement between the parties.
6. If a contract is entered for services to be performed out of Malaysia but it involves Malaysian contracting party, will it be chargeable with stamp duty?
Paragraph 4 of the General Exemptions under the First Schedule provides an exemption for instruments relating exclusively to matters done or to be done outside Malaysia. However, the term “exclusively” is not clearly defined and must be interpreted in the context of the instrument as a whole, thereby setting a relatively high threshold.
Accordingly, a detailed, case-by-case review is necessary to assess whether any nexus to Malaysia exists and whether the exemption can be relied upon.
7. Is a letter of engagement for provision of services chargeable with stamp duty?
Service agreement can be charged with 2 different types of ad valorem rates under Items 22(1)(a) or (b) of First Schedule, or even at fixed rates of RM10 or RM50, depending on its terms and substance.
8. Are there any stamp duty implications when setting up a Sdn. Bhd. in Malaysia?
Yes, stamp duty is chargeable on a company’s constitution at a flat rate of RM200 under Item 29A, First Schedule.
9. How can an organisation that has different business divisions entering into different contracts daily, streamline and ensure the correct and timely stamping of instruments?
(a) adopt a formal stamp duty policy setting out the organisation’s stamping obligations and general stamping principles;
(b) develop internal guidelines and standardised workflow covering end-to-end stamping process, with clear responsibilities and internal deadlines for different business divisions;
(c) conduct regular training for relevant stakeholders on stamp duty obligations and internal procedures.
10. Are there any penalties for incorrect declaration of stamp duty under STSDS?
Under Section 72D(2) of the SA1949, a person who submits an incorrect stamp duty return or provides inaccurate information resulting in an understatement of stamp duty may be required by the Collector of stamp duty to pay a penalty equal to the amount of duty undercharged, provided no criminal prosecution has been initiated in respect of the same incorrect return or information.
That said, a special penalty waiver is currently available for instruments stamped under Phase 1 of STSDS. For further details, please refer to: https://dnh.com.my/special-penalty-waiver-for-stamping-of-phase-1-instruments-in-2026/
Key Takeaways
In line with the introduction of the STSDS, businesses and individuals should take proactive steps to understand their stamping obligations, identify chargeable instruments in day-to-day transactions, review existing practices and ensure timely stamping. While the 2026 special penalty waiver offers some temporary relief for genuine errors, it will not last forever. Any delay or non-stamping will still result in costly penalties.
Where there is any uncertainty on the applicable stamp duty treatment, we strongly recommend that professional advice be sought promptly before the stamping deadline lapses.
To assist you in assessing your stamp duty exposure, you may also explore our stamp duty calculator here: https://dnh.com.my/stamp-duty-calculator/.
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This article was written by Chin Wan Xin (Associate) from Donovan & Ho’s corporate practice.
Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.
