Major Changes with Respect to Stamp Duty in Malaysia

It is currently tax season in Malaysia, during which all Malaysian individuals are busy in preparing and filing their income tax returns for the year 2025. In addition, one may also be familiar with another taxation regime imposed by the Government of Malaysia, namely, stamp duty, which is applicable to various instruments or documents executed by individuals or corporate entities. 

Recently, there has been a major change in Malaysia's stamp duty landscape in recent decades. The centrepiece of the reforms is the introduction of the Stamp Duty Self-Assessment System (“SA System”). Under this new system, duty payers are required to self-assess the amount of stamp duty payable and make payment accordingly, without relying on or waiting for any notification, verification, or assessment from the Inland Revenue Board of Malaysia (“LHDN”). Traditionally, LHDN has been assessing and determining the amount of stamp duty payable in which the duty payers would submit their instruments electronically, and the LHDN would determine the duty payable under the instruments. 

Based on our recent experiences, certain security instruments such as friendly loan agreements and facility agreements, sub-tenancy agreements, and letter of employment are now being assessed pursuant to SA System. This SA System has materially reduced processing delays and enhanced high levels of efficiency for various commercial transactions. 

One of the most highly debated changes concerns foreign property purchasers (including foreign company or foreign person who are neither citizens nor permanent residents), which would impact certain categories of Malaysia My Second Home (MM2H) participants. Starting from 1 January 2026, sale of residential property to foreigners are charged a flat 8% duty of the purchase price, representing an increase from the previous rate of 4%. The scope of “residential property” covers house, condominium, apartment, flat, service apartment or small office home office used solely as dwelling house. 

For all employers out there, there is also a practically significant change concerning employment contracts. Employment contracts are subject to a fixed stamp duty of RM10 under Item 4 of the First Schedule to the Stamp Act 1949. Nonetheless, with effect from 1 January 2026, an exemption from stamp duty is granted for employment contracts where the wages do not exceed RM3,000 per month. This higher exemption threshold (as compared to the previous threshold of RM300 per month) significantly eases the compliance burden on employers when hiring lower-income workers under formal employment arrangements. 

As for leasing arrangements, we wish to highlight that there has also been a revision to the stamp duty rates, which are calculated based on the annual rent and the lease term. The new applicable rates of lease are as follows:- 

For every RM250.00 (or part thereof) where:- 

1. Lease term not exceeding 1 year: RM1. 

2. Lease term exceeding 1 year but not exceeding 3 years: RM3. 

3. Lease term exceeding 3 years but not exceeding 5 years: RM5. 

4. Lease term exceeding 5 years or for any indefinite period: RM7. 

   
   

These revisions introduce significant changes to leasing transactions and will affect both lessors and lessees. 

In conclusion, as a prudent duty payer in Malaysia, one shall always be alert with the changes with respect to Malaysia's stamp duty rates and its framework. For businesses, one may establish and determine the appropriate procedure in ensuring the compliance with the laws of Malaysia in order to accurately classify, calculate, and file stamp duty returns with the LHDN, particularly for service agreements, leases, employment contracts, and commercial agreements. 

Should you require any further assistance or advice on stamp duty matters or the adjudication of instruments, please do not hesitate to contact us.