Commission-Only Agreement (Malaysia)
COMMISSION-ONLY AGREEMENT
Contracts Act 1950 (Act 136) | Employment Act 1955 (Act 265) | Minimum Wages Order 2022 | Income Tax Act 1967 (Act 53)
THIS COMMISSION-ONLY AGREEMENT is made on [Agreement Date]
BETWEEN:
(1) [Principal Name] of [Principal Address] (hereinafter referred to as the "Principal"); AND
(2) [Agent Name] (MyKad No: [Agent NRIC]), professional licence/registration: [Agent Licence] (hereinafter referred to as the "Agent").
1. APPOINTMENT AND SCOPE
1.1 The Principal appoints the Agent on a commission-only basis to market and sell the following products/services: [Products/Services].
1.2 Territory: [Territory].
1.3 The appointment is on a non-exclusive basis unless otherwise agreed in writing.
1.4 Agreement Term: [Agreement Term].
2. COMMISSION AND PAYMENT
2.1 Commission Rate: The Agent shall earn commission at the rate of [Commission Rate] on each completed transaction.
2.2 Commission Trigger: Commission is earned upon: [Commission Trigger].
2.3 Payment: [Payment Frequency].
2.4 Chargeback: [Chargeback Provision].
2.5 Minimum Guarantee: [Minimum Guarantee].
2.6 Commission constitutes the Agent's only remuneration. No base salary, allowances, or benefits are payable unless separately agreed in writing.
3. AGENT STATUS AND TAX OBLIGATIONS
3.1 Agent Status: [Agent Status].
3.2 Where the Agent is an independent contractor: the Agent is responsible for their own income tax under the Income Tax Act 1967 (Form B filing with LHDN), EPF self-contributions, SOCSO self-employed scheme, and any applicable SST under the Service Tax Act 2018.
3.3 Where the Agent is an employee: the Minimum Wages Order 2022 (RM 1,500/month minimum wage in Peninsular Malaysia) applies, and the Principal shall implement MTD/PCB deductions, EPF (12-13% employer share), SOCSO, and EIS contributions from the first month of employment.
4. OBLIGATIONS
4.1 The Agent shall market the Principal's products/services diligently, honestly, and in compliance with all applicable laws and professional regulatory requirements.
4.2 The Agent shall maintain all required professional licences and registrations (e.g., BOVAEA negotiator registration, BNM insurance agent appointment) in good standing throughout this Agreement.
4.3 The Agent shall not make any representations about the products/services that are false, misleading, or inconsistent with the Principal's authorised marketing materials.
4.4 The Agent shall maintain the confidentiality of the Principal's client information, pricing, and business strategies.
5. TERMINATION
5.1 Either party may terminate this Agreement by giving [Notice Period] written notice to the other party.
5.2 Upon termination, the Agent shall be entitled to receive commission on all transactions where the commission trigger event occurred before the termination date. No commission is payable on deals initiated but not completed before the termination date, unless otherwise agreed.
5.3 Upon termination, the Agent shall immediately cease holding themselves out as a representative of the Principal and shall return all Principal materials, client lists, and marketing collateral.
6. GOVERNING LAW
6.1 This Agreement is governed by the laws of Malaysia. Disputes shall be referred to the courts of Malaysia under the Subordinate Courts Act 1948.
Principal
________________
Signature
Agent
________________
Signature
Witness
________________
Signature
What Is a Commission-Only Agreement (Malaysia)?
A Commission-Only Agreement in Malaysia records the terms the parties accept and the commitments each makes to the other.
Commission-only agreements are governed by the Contracts Act 1950 (Act 136) when the agent is structured as an independent contractor. Where the commission-only worker is characterised as an employee — based on the control test and economic reality test applied by the Industrial Court of Malaysia — the arrangement may fall within the Employment Act 1955 (Act 265) and the Minimum Wages Order 2022. Under the Minimum Wages Order 2022, the minimum wage for employees in Peninsular Malaysia is RM 1,500 per month — a commission-only employee who earns below this threshold may have a statutory claim for minimum wage shortfall.
The insurance industry in Malaysia provides the most structured framework for commission-only compensation. Insurance agents and takaful agents must be registered with an insurance company or takaful operator licensed by Bank Negara Malaysia (BNM) under the Financial Services Act 2013 (Act 758) or the Islamic Financial Services Act 2013 (Act 759), and commission rates are regulated by the Life Insurance Association of Malaysia (LIAM), the General Insurance Association of Malaysia (PIAM), and the Malaysian Takaful Association (MTA).
Real estate negotiators in Malaysia engaging on a commission basis must be registered with the Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVAEA) under the Valuers, Appraisers, Estate Agents and Property Managers Act 1981 as a registered negotiator under a licensed real estate firm. The standard commission rate for property transactions in Peninsular Malaysia is prescribed by the BOVAEA Scale of Fees — 3% for residential property sales and 2-3% for commercial and industrial property transactions.
The legal framework governing the Commission-Only Agreement (Malaysia) in Malaysia draws on several key statutes and regulatory bodies. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Parties executing a Commission-Only Agreement (Malaysia) in Malaysia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Employment Act 1955 (Act 265) sets the foundational requirements.
When Do You Need a Commission-Only Agreement (Malaysia)?
A commission-only agreement is needed in Malaysia whenever a business engages a sales agent, negotiator, or distributor to generate sales or introduce business in exchange for commission, without paying a base salary.
A commission-only agreement is required when a property developer or real estate firm engages real estate negotiators to market and sell residential, commercial, or industrial properties on a commission basis under a BOVAEA-registered agency arrangement, where the negotiator earns 1.5% to 2% of the transaction value as their share of the agent's commission.
A commission-only agreement is needed when an insurance company or takaful operator licensed by Bank Negara Malaysia (BNM) appoints insurance agents to sell life insurance, general insurance, or takaful products, where the agent earns commission at rates regulated by LIAM, PIAM, or MTA on each policy sold.
A commission-only agreement is required when a financial services firm or unit trust management company registered with the Securities Commission Malaysia (SC) appoints financial advisers or unit trust consultants to distribute investment products, where the agent earns an initial commission and trailing annual management fee based on assets under management.
A commission-only agreement is needed when a manufacturer or principal company appoints a sales agent or distributor to represent its products in a specific territory in Malaysia — common in the fast-moving consumer goods (FMCG), pharmaceutical, and industrial equipment sectors — where the agent earns a commission on orders introduced without bearing inventory risk.
A commission-only agreement is required when a SaaS company or technology firm engages business development representatives in Malaysia on a commission-only basis to generate enterprise sales leads and close contracts, with commission calculated as a percentage of annual contract value (ACV) or recurring monthly revenue (MRR).
Parties in Malaysia should prepare a Commission-Only Agreement (Malaysia) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Commission-Only Agreement (Malaysia)
A complete Malaysia commission-only agreement must contain the following elements.
Parties and scope: Full legal names, MyKad or SSM numbers, and addresses of the principal and the sales agent. A precise description of the products or services the agent is authorised to sell or promote, and the geographic territory (nationwide, specific states, or specific accounts).
Commission rate and structure: The commission rate expressed as a percentage of net sales value, gross sales value, or profit margin, clearly stating the calculation base. For tiered structures — where higher sales volumes attract a higher commission rate — each tier threshold and rate must be specified. For insurance agents, the commission rate must comply with the applicable BNM guidelines and association regulations.
Commission trigger and payment: The event that triggers commission entitlement — signed contract, received payment, completion of delivery, or policy issuance. The payment date (e.g., within 30 days of the trigger event) and the payment method (bank transfer to the agent's account). A commission-only agent with no base salary should receive commission promptly to avoid cash flow hardship.
Chargeback provisions: Whether the principal has the right to claw back commission if a customer cancels within a cooling-off period, defaults on payment, or returns the product — common in insurance (where BNM regulations prescribe minimum policy holding periods before clawback can apply) and direct selling under the Direct Sales and Anti-Pyramid Scheme Act 1993 (Act 500).
Independent contractor status: An express statement that the agent is an independent contractor under a contract for services, responsible for their own income tax, EPF self-contribution, and professional registration and licensing, unless the working arrangements indicate employment.
Minimum earnings protection: Where the agent is legally an employee (and thus covered by the Employment Act 1955), a provision confirming that if commission earnings in any month fall below the Minimum Wages Order 2022 rate (RM 1,500 per month), the principal will make up the shortfall as a draw against future commission.
Termination: The notice period for termination, the treatment of pipeline commissions and pending deals at termination, and any post-termination non-solicitation restrictions under the Contracts Act 1950.
Additional compliance elements for a Commission-Only Agreement (Malaysia) used in Malaysia include: Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Forms-legal.com provides this template as a starting point for Malaysia-compliant documentation.
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Forms Legal. (2026). Commission-Only Agreement (Malaysia) (Malaysia) [Legal document template]. Forms Legal. https://forms-legal.com/malaysia/employment/contracts/commission-only-agreement-malaysia
"Commission-Only Agreement (Malaysia) (Malaysia)." Forms Legal, 2026, https://forms-legal.com/malaysia/employment/contracts/commission-only-agreement-malaysia.
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author = {{Forms Legal}},
title = {Commission-Only Agreement (Malaysia) (Malaysia)},
year = {2026},
howpublished = {\url{https://forms-legal.com/malaysia/employment/contracts/commission-only-agreement-malaysia}},
note = {Free legal document template. Based on Employment Act 1955 (Act 265)}
}Frequently Asked Questions
A commission-only arrangement is legal in Malaysia under the Contracts Act 1950 (Act 136) when the agent is a genuinely independent contractor under a contract for services. However, if the commission-only worker is legally an employee under a contract of service — based on the control test and economic reality test applied by Malaysian courts and the Industrial Court — the arrangement may violate the Minimum Wages Order 2022, which mandates a minimum monthly wage of RM 1,500 for employees in Peninsular Malaysia. An employer cannot pay an employee less than the statutory minimum wage even if the employment contract provides for commission-only remuneration. Employers who underpay minimum wage commit an offence under Section 99B of the Employment Act 1955 (as amended) and may face fines and liability for arrears. Commission-only arrangements that are, in substance, employment relationships are illegal if they result in earnings below the minimum wage.
The commission rates for real estate transactions in Peninsular Malaysia are prescribed by the Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVAEA) under the Valuers, Appraisers, Estate Agents and Property Managers Act 1981 and the BOVAEA Scale of Fees. For property sales, the maximum commission is 3% of the transaction price for residential property and 2% to 3% for commercial and industrial properties, subject to a minimum fee. Commission is payable by the seller. The licensed real estate firm retains the commission from the client and pays the registered negotiator's share (typically 50% to 70% of the gross commission) under a commission-sharing agreement. Only licensed estate agents and registered negotiators operating under their firm may earn property transaction commissions legally in Malaysia — unlicensed tout activity is an offence under the Valuers, Appraisers, Estate Agents and Property Managers Act 1981.
Commission income earned by an independent contractor in Malaysia is assessable as business income under Section 4(a) or professional income under Section 4(b) of the Income Tax Act 1967. Commission earned by an employee is assessable as employment income under Section 4(c). Regardless of how the commission is characterised, all Malaysian tax residents earning above the income threshold must declare commission income in their annual income tax return filed with the Inland Revenue Board of Malaysia (LHDN) — Form B for sole proprietors and independent contractors, Form BE for salaried employees with commission income. For insurance agents, unit trust consultants, and financial advisers earning commission from Financial Services Act 2013 licensees, withholding tax provisions under Section 109 of the Income Tax Act 1967 may apply. Business expenses directly incurred in earning the commission — vehicle costs, entertainment, communications — are deductible under Section 33 of the Income Tax Act 1967.
Unpaid commission that has been validly earned before the termination of a commission agreement in Malaysia remains a debt owed by the principal to the agent, enforceable through the civil courts under the Contracts Act 1950. The agent retains the right to commission on all transactions that were completed, invoiced, or contracted prior to the termination date, regardless of subsequent termination. The key question is when commission is 'earned' under the agreement — at signing of the customer contract, at delivery, or at payment receipt. Disputes about earned but unpaid commission are frequently resolved in the Magistrates' Court (claims up to RM 100,000) or Sessions Court (RM 100,000 to RM 1 million) in Malaysia. Employees (as opposed to independent contractors) may also file claims for unpaid wages (including commission) with the Department of Labour (JTKSM) under Section 69F of the Employment Act 1955.
Registration requirements for commission-only agents in Malaysia depend on the industry. Real estate negotiators must register with BOVAEA under the Valuers, Appraisers, Estate Agents and Property Managers Act 1981 and must operate under a licensed estate agency firm. Insurance agents must be appointed by a BNM-licensed insurance company or takaful operator and must hold a valid agency contract compliant with BNM guidelines under the Financial Services Act 2013. Unit trust consultants must hold a Capital Markets Services Representative Licence (CMSRL) issued by the Securities Commission Malaysia under the Capital Markets and Services Act 2007 (Act 671). Direct sales agents operating under the Direct Sales and Anti-Pyramid Scheme Act 1993 (Act 500) must be registered with the Ministry of Domestic Trade and Cost of Living (KPDN). Commission agents in unregulated sectors (general sales, B2B business development) do not require specific regulatory registration but must comply with the Contracts Act 1950.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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