Employer Responsibilities under Malaysia’s Income Tax Act (2025 Guide)
Key Takeaway
- To inform IRBM any new employee within 30 days.
- To inform IRBM the cessation/retirement/death of an employee.
- To inform IRBM within 30 days before the date of employee intending to leave Malaysia.
As an employer in Malaysia, understanding and complying with the Income Tax Act 1967 is essential to avoid penalties and ensure smooth operations. This updated 2025 guide covers your key obligations—from monthly tax deductions to year-end reporting and employee notifications—complete with deadlines and online filing tools.
Key Employer Deadlines — 2025 Overview
| Obligation | Deadline | Notes |
|---|---|---|
|
Form EA (CP8A) to employees |
28 Feb 2025 |
Must issue even to former or contract workers |
|
Form E (Employer Return) to LHDN |
31 Mar 2025 (manual); 30 Apr 2025 (e-Filing) |
Required even with no employees |
|
Monthly Tax Deduction (MTD/PCB) |
By 15th of following month |
Via e-PCB Plus (e-CP39) system |
|
New Employee Notification (CP22) |
Within 30 days of hiring |
Mandatory via MyTax e-CP22 from 1 Sep 2024 |
|
Cessation Notification (CP22A/CP22B) |
≥30 days before end of employment |
Submit via MyTax e-SPC, withhold final payment until clearance granted |
|
Employee Departure (CP21) |
≥30 days before departure |
Notify via e-SPC; withhold final pay until tax cleared |
Monthly Compliance: MTD/PCB
Employers must:
- Hold an employer “E” number.
- Use employee’s TP3 (prior employment data) and TP1 (claims like zakat) correctly.
- Deduct MTD using standard tables/computerised payroll.
- Remit to LHDN via e‑PCB Plus by the 15th each month.
- Maintain records for at least 7 years.
Penalties range from fines up to RM20,000, or imprisonment, or both, under Section 120 of the ITA
Year-End Obligations
Form EA (Statement of Remuneration)
- Distribute to all employees (including ex-staff) by 28 Feb 2025.
- Contains salary, allowances, EPF/SOCSO, PCB details.
- Penalties: up to RM20,000 fine, 6 months imprisonment, or both
Form E (Employer’s Annual Declaration)
- Submit to LHDN by 31 Mar 2025 (manual) or 30 Apr 2025 (e‑Filing).
- Reports all employee remuneration and tax deductions.
- Penalties: RM200–RM20,000, imprisonment, or both
LHDN requires employers—regardless of business type or number of employees—to submit Form E electronically
Employee Lifecycle Notifications
New Employees (CP22)
Submit within 30 days of hire via MyTax e‑CP22 (mandatory since 1 Sept 2024)
Cessation (CP22A / CP22B)
Notify ≥30 days before termination/retirement/death via e‑SPC.
Must withhold final payment until tax clearance (up to 90 days)
Departure from Malaysia (CP21)
Submit ≥30 days before expatriate leaves via e‑SPC.
Should retain final salary until tax clearance is issued
Notification of Commencement / Cessation of Employment of an Employee
Pursuant to Section 83 of the Income Tax Act 1967 (ITA 1967), we wish to remind all employers of their responsibility to inform the Inland Revenue Board of Malaysia (IRBM), via prescribed forms (as below), on the following:
Table 1:
Penalty/Fine
Failure to notify will result in the employer being charged under paragraph 120(1)(c) and / or subsection 107(4)
CP22B (Government) http://phl.hasil.gov.my/pdf/pdfborang/CP22B_Pin.1_2021.pdf
Please take note that while Section 83 of the ITA 1967 provides that the law applies in the situation where the employer commences, or about to cease to employ an individual who is or is likely to be chargeable to tax in respect of income in respect of gains or profits from the employment, the IRBM has recently adopted the practise of applying such requirements to ALL employees who have commenced employment, or cease to be employed by the employer.
All applications should be made by the employer to IRBM by the following methods:
- e-SPC at IRBM official website; or
- Form which can be downloaded from IRBM official website (please refer to TABLE 1 above).
What Happens if You Don’t Comply?
Failure to comply with the above may result in, upon conviction of an offence under Section 120 of the ITA 1967, the employers being liable to a fine of not less than RM200 and not more than RM20,000 or to imprisonment for a term not exceeding six months or to both.
- Missing Form EA or E deadlines may result in fines up to RM20,000, imprisonment for up to 6 months, or both
- Failure to submit CP forms or remit PCB can lead to similar legal consequences
- ITA Sections 120–114 specify escalating penalties for non-compliance
FAQ
By 28 February every year for the prior year’s earnings.
31 March (manual) or 30 April (e-Filing) annually.
Monthly by the 15th of the following month via e‑PCB Plus
Submit CP21 via e‑SPC ≥30 days before departure and withhold final pay until tax clearance.
