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How Budget 2026 Stamp Duty Changes Affect SME Hiring Costs
Every employment contract executed in Malaysia is subject to stamp duty under Item 4 of the First Schedule of the Stamp Act 19491. The duty is a flat RM10 per contract, but each contract also requires a submission through the Lembaga Hasil Dalam Negeri Malaysia (LHDN )STAMPS system2, a payment, and a stamp certificate to be downloaded and filed. Miss the 30-day window after execution, and late penalties apply, starting from RM50. An unstamped contract may also be inadmissible as evidence in court.
Under Budget 20263, tabled on 10 October 2025, the exemption threshold for employment contracts was raised from RM300 to RM3,000 per month. The change applies to all contracts of service executed from 1 January 2026 onward.
The Old Threshold Was Below Minimum Wage
The previous RM300 exemption had been in place for decades. With the national minimum wage at RM1,700 per month since February 2025, the old threshold sat below the legal minimum an employer could pay. Every Small and Medium-sized Enterprise (SME ) hiring at minimum wage or above was required to stamp every employment contract.
The new RM3,000 line covers most entry-level and mid-level SME roles in retail, food and beverage, logistics, manufacturing, and general administration. An SME with 15 employees, eight of whom earn RM3,000 or below, now stamps seven contracts instead of 15. The duty saved is RM80, but that is eight fewer portal submissions, payments, and certificate filings.
The Self-Assessment System Running Alongside It
From 1 January 2026, LHDN also implemented the Stamp Duty Self-Assessment System4(SDSAS) for employment contracts and other instruments. Under the previous regime, LHDN officers assessed and calculated the duty. Under SDSAS, employers self-assess.
For contracts above RM3,000 per month, employers must calculate the RM10 duty, submit the return through the MyTax portal5, and pay within 30 days of execution. LHDN has announced that it will not impose penalties for computation errors during the first year of SDSAS, covering applications submitted between 1 January and 31 December 2026. The grace period applies to calculation errors only and does not extend to late submissions.
For contracts at or below RM3,000, the exemption removes them from the stamping process entirely. The higher threshold applies only to contracts executed on or after 1 January 2026. Employment contracts signed during 2025 still needed to be stamped under the old rules, with a penalty waiver for those stamped by 31 December 2025. LHDN also exempted contracts from 2022 to 2024, which were technically dutiable but had limited enforcement.
Managing Growth With UOB
Hiring at scale adds payroll complexity. A business bringing on eight new staff at RM2,500 per month adds RM20,000 to its monthly obligations before Employees Provident Fund (EPF) and Social Security Organisation (SOCSO) contributions. UOB's digital banking solutions6 support bulk salary payments, payroll scheduling, and account management through a single platform.
Expanding a team also often requires working capital. Hiring ahead of revenue creates a cash flow gap between spending and earnings. UOB's business lending solutions7 cover this, from operations financing for working capital to fixed asset financing for businesses investing in equipment or premises alongside their hiring plans.
