Consultancy agreement in Malaysia: Template, Key Clauses and Local Law (2026)

What a Malaysian consultancy agreement is, and what local law requires A consultancy agreement in Malaysia engages an independent consultant, a person or a firm, to deliver advice or a defined piece of work for a fee. It is a contract for services, not a contract of service, which means it sits under the Contracts Act 1950 rather than the Employment Act 1955. That difference decides who owes EPF, SOCSO and employee protections, so getting the classification right is the first job. Key points to build around: - Classification. Malaysian courts look at the real relationship, not the label. They weigh control, who supplies the tools, who carries the financial risk, whether the person is integrated into the business and whether they can work for others. If an engagement looks like employment in substance, a court can treat it as employment, with the duties that brings. Keep a consultant genuinely independent.

• Restraint of trade. Under section 28 of the Contracts Act 1950, a clause that restrains a person from a lawful trade or profession is void, subject to narrow statutory exceptions. Malaysian courts do not apply the English reasonableness test. So a post-term non-compete on a consultant is generally void. Protect the business with confidentiality, IP assignment and non-solicitation framed around protecting information and relationships.
• Tax. A resident consultant handles their own income tax. Fees paid to a non-resident for certain services can attract withholding tax, and service tax under the Sales and Service Tax regime may apply depending on the service. Confirm the current rates with the Inland Revenue Board (LHDN) and the Royal Malaysian Customs. This is general guidance, not legal advice. Confirm the current position with a Malaysian lawyer or LHDN before you rely on any clause. Last verified October 2026. ## Malaysia consultancy agreement template Copy the block below and fill the bracketed fields. ``` CONSULTANCY AGREEMENT Made on [DATE] BETWEEN: [CLIENT NAME], company no. [no.], of [address] ("Client") AND [CONSULTANT NAME], [NRIC / company no.], of [address] ("Consultant") 1. SERVICES The Consultant will provide [describe the services and deliverables] as set out in Schedule 1. 2. INDEPENDENT STATUS The Consultant is an independent contractor, not an employee. The Consultant controls how the work is done, carries its own costs, and is not entitled to EPF, SOCSO or any employee benefit from the Client. 3. TERM This Agreement runs from [START] until [END or completion], unless ended earlier under clause 9. 4. FEES AND TAX The Client pays RM [AMOUNT] [per deliverable / per month / fixed] within [N] days of a valid invoice. [State who bears service tax and any withholding tax, and that the Consultant handles its own income tax.] 5. EXPENSES The Client reimburses pre-approved expenses against receipts. 6. CONFIDENTIALITY The Consultant keeps the Client's confidential information secret during and after the term and uses it only for the Services. 7. INTELLECTUAL PROPERTY Work product created under this Agreement belongs to the Client on payment, and the Consultant assigns those rights to the Client. 8. NON-SOLICITATION During the term and for [N] months after, the Consultant will not solicit the Client's staff or clients it worked with. [Note: a post- term non-compete is likely void under section 28.] 9. TERMINATION Either party may end this Agreement on [N] days written notice, or immediately for material breach. Fees for work done remain payable. 10. GOVERNING LAW This Agreement is governed by the laws of Malaysia. Signed: Client: __________ Consultant: __________

- **Independent status (clause 2).** This clause is only as strong as the reality. Set hours, close supervision and full integration point to employment. Keep control, tools and risk on the consultant's side.
- **Fees and tax (clause 4).** State the fee, who bears service tax and any withholding tax on a cross border payment, and that the consultant handles their own income tax.
- **IP (clause 7).** Assign work product to the client on payment, so the client owns what it paid for.
- **Non-solicitation (clause 8).** Use non-solicitation and confidentiality, framed to protect information and relationships, rather than a post-term non-compete that section 28 is likely to void. ## Red flags to check before you sign - An independent status clause that the day to day reality contradicts, which risks a finding of employment and back-dated EPF and SOCSO.
- A post-term non-compete that section 28 of the Contracts Act 1950 is likely to make void.
- No clarity on service tax, withholding tax and who bears them.
- A scope with no deliverables, dates or acceptance test.
- No IP assignment, so the client does not own what it paid for.
- A liability clause with no cap, or one out of proportion to the fee. ## The classification test in practice Malaysian courts and tribunals do not take the word consultant at face value. They apply a multi-factor test to decide whether the relationship is really a contract for services or a disguised contract of service. The main factors are control over how the work is done, who provides the tools and equipment, who carries the financial risk and chance of profit, whether the person is integrated into the business, and whether they can work for others. No single factor decides it; the tribunal looks at the whole picture. A consultant who sets their own methods, invoices for work, uses their own equipment, bears their own costs and serves several clients looks genuinely independent. One who works fixed hours at your office, under close supervision, paid a steady monthly sum, with no other clients, looks like an employee whatever the contract says. If reclassification happens, the client can face back-dated EPF and SOCSO and employee claims, so it pays to get the substance right from the start rather than rely on the label. ## A note on jurisdiction and Adira's coverage Malaysian tax rates and the proposed reform to section 28 can change, so confirm the current position with LHDN or local counsel before you rely on a figure. Adira is India first in its depth today and uses an international setting for other jurisdictions. Deep, verified Malaysian coverage is on Adira's roadmap rather than established today, so treat any Malaysia specific output as a draft to check locally. ## Where a contract workspace helps A template gets you a sound consultancy agreement. The ongoing work is keeping scope, fee and tax terms consistent across every consultant, tracking renewal and notice dates, and holding each signed version and its deliverables in one place. When drafting, review and tracking live in one AI workspace tuned to how your company engages consultants, the scope, fees and classification stay clear across every engagement, with edits made in plain language. [Adira](https://adiralaw.com) is one workspace built to work this way, with Malaysian depth on its roadmap. This template alone is enough to put a fair agreement in place today.