Employer’s Statutory Requirement
Being an employer is not an easy job. On top of the daily ins and outs of running a business, employers also have a whole list of statutory requirements to fulfil. The Income Tax Act (ITA) 1967 places an obligation on employers to fill out a list of forms, and failure to do so can result in dire consequences.
Section (s.) 120(1) of the ITA 1967 clearly lays out the penalties that may apply if an employer fails to comply with statutory requirements. When an employer fails to submit a form or make the necessary deductions from an employee’s income, they may be fined RM200 to RM20,000, be imprisoned for up to 6 months, or both.
Overview of Employer’s Statutory Requirement
The following is the list of forms that an employer has to submit to the Malaysian Inland Revenue Board (HASiL), which we will abbreviate as IRBM hereinafter:
- Form CP22
- Form CP22A/CP21
- Form CP39
- Form TP1/TP3
- Form EA
- Form E
Form CP22
When your company takes in a new employee, you have to notify the IRBM via Form CP22 within 30 days from the date of commencement of employment.
Form CP22A
In the event of cessation of employment, Form CP22A should be submitted to the IRBM not later than 30 days prior to the cessation of employment.
Do note that Form CP22A is not applicable if the employee is not retiring from employment. In other words, this form is not applicable if the employee is subject to a monthly tax deduction (MTD) and deduction has been made or if they have a remuneration less than minimum income subject to MTD.
In the event of resignation, retirement, or death, then Form CP22A must be submitted, and the employer should withhold the money payable to that employee until they receive a Clearance Letter from the employee’s assessment branch.
Form CP21
If your employee ceases to be under your employment and will be leaving Malaysia for more than 3 months, then you will need to submit Form CP21 to that employee’s assessment branch not later than 30 days prior to the employment cessation.
Form CP39
Form CP39 is the MTD (potongan cukai bulanan or PCB in Bahasa Malaysia) statement that has to be submitted by the employer to the IRBM every month.
An employer using the computerised calculation method such as Calculator PCB, e-PCB, computerised payroll system, or an in-house/ customised payroll system that has been verified by IRBM shall compute MTD based on gross taxable remuneration less total monthly EPF contribution (inclusive EPF for non-taxable remuneration/allowance) limited to RM4,000.
The employer will need to deduct the MTD from the remuneration of an employee in each month or the relevant month in accordance with the Schedule of Monthly Tax Deductions or Computerised Calculation Method and pay it to the Director General not later than the 15th day of every calendar month.
Employers will have to furnish the following details when submitting MTD payments:
- income tax number (if any);
- name as stated on the identity card or passport;
- new and old identity card number/police number/army number or passport number (for foreign employees); and
- MTD/additional deductions amount.
The remunerations that are subject to MTD include:
s.13(1)(a) Cash remuneration
s.13(1)(b) Benefit in kind (BIK)/ Amenities not convertible into money
s.13(1)(c) Value of Living Accommodation (VOLA)
s.13(1)(d) Refund from unapproved pension or provident fund, scheme or society
s.13(1)(e) Compensation for loss of employment
There are 3 ways to submit MTD:
- e-CP39
- e-Data PCB
- e-PCB
From 1 July 2019 onwards, no manual forms are allowed anymore.
Form TP1/TP3
Forms TP1 and TP3 need to be submitted to the employer by the employee. Form TP1 is to claim deductions and rebates in the relevant months, while Form TP3 is to notify the current employer about the information relating to an employee’s previous employment.
Form EA
Every employer should prepare and disseminate Form EA to their employees before the end of February every year. Form EA includes the details of all employment income paid to each individual employee.
Form E
Form E is a declaration report submitted by employers to inform the IRB about the information relating to their employees for the year. Form CP8D, which is the return on remuneration from employment, claim for deduction and particulars of tax deduction under the Income Tax Rules (Deduction from Remuneration) 1994 for the year, needs to be submitted on or before the submission due date of Form E for Form E to be considered complete.
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