Issues of Employees

Yearly Remuneration Statement (EA / EC Form)

Refer to Section 83(1A), Income Tax Act 1967, with effect from year of assessment 2009, every employer shall, for each year, prepare and render to his employee statement of remuneration of that employee on or before the last day of February in the year immediately following the first mentioned year.

Forms to be used:

 1. 'EA' - Remuneration Statement for Private Employees.
 2. 'EC' - Remuneration Statement for Government Employees.

The above mentioned form will be attached together with Form E which is posted to you. In case if you do not receive it, Form EA/EC can be downloaded here.

Form EA or EC is not required to be sent to IRBM.

Notification of New Employee

The employer must notify the nearest assessment branch within one month from the date of commencement of employment of an individual who is subject to or may subject to income tax using Form CP22.

Failure to notify IRBM will render an employer liable to prosecution and on conviction, liable to a fine of not less than RM200 and not more than RM2,000 or to imprisonment for a term not exceeding six months or to both.

The employer also be responsible for any tax due from the above mentioned employee.

Retire or Cease From Employment

The employer is responsible for notifying IRBM at least thirty days before the date the employee ceases employment if:

 a. Employee is about to retire.
 b. Employee is subject to MTD scheme and the employer has not made any deduction.
 c. Employee is about to leave Malaysia permanently.

The employer must withhold money payable to the employee until they receive a Clearance Letter from the Assessment Branch.
However, the employer is not required to send notification about the employee ceasing employment or withhold money payable to him if:

 a. Employee is subject to MTD and deduction has been made by the employer.
 b. Employee's remuneration is less than the minimum income subject to MTD.
 c. Employer is aware that the employee is to be employed elsewhere in Malaysia.

Form used:

 a. CP22A - Notification of cessation of employment (Employment of Private Sector Employees)
 b. CP22B - Notification of cessation of employment (Employment of Public Sector Employees)

Failure to notify IRBM will render an employer liable to prosecution and on conviction, liable to a fine of not less than RM200 and not more than RM2,000 or to imprisonment for a term not exceeding six months or to both.

The employer will also be responsible for any tax due from the above mentioned employee.

The MTD amount is ascertained based on the following criteria:

Employee’s Residence Status

The residence status of an individual is determined under section 7 of the Act. Public servant or officer of a statutory authority who are nonresident by virtue of:

 a. exercising his employment outside Malaysia; or
 b. attending any course of study in any institution or professional body outside Malaysia which is fully-sponsored by the employer,

is deemed to be a resident for the basis year for that particular year of assessment and for any subsequent basis years when he is not in Malaysia.

Income from sources outside Malaysia received by persons in (a) or (b) above is exempted from income tax in Malaysia according to the Act.

 i. Non Resident Employee

MTD of an employee who is not resident or not known to be resident in Malaysia shall be calculated at the rate of 26% of his remuneration.

Example :

Employee is not resident in calendar year 2010.

Total monthly remuneration : RM3,000.00

MTD calculation : RM3,000.00 x 26% Total MTD : RM780.00


 ii. Resident Employee

MTD of an employee who is resident or known to be resident in Malaysia is derived after deducting all allowable deductions under the Act.

Amendment on Monthly MTD

An employee can request his employer to increase his existing MTD deduction without getting approval from IRBM if the deduction made is not sufficient to cover the actual tax payable.

Employee Not Eligible for MTD but Liable to Tax

An employee whose monthly remuneration after EPF deduction is below RM2,451 may be liable to income tax even though his remuneration is not subject to tax deduction under the MTD.

It is the responsibility of the employer to inform the nearest IRBM office to have a file registered for that employee by filling up form CP22. The form can be downloaded here.

The employee is also responsible to register an income tax file if his employer fails to do so.

Beginning from the year of assessment 2009, director fees or bonus relating to a year which is received in any current year, that remuneration becomes part of remuneration in the current year it is received. Use Form CP39 only (Pin. 2/05) for current month MTD payment.

For additional remuneration (other than bonus and director’s fee) for prior years before year 2009 which is received in the current year, MTD calculation shall be calculated by using Bonus Formula and Schedule of Monthly Tax Deduction for the relevant year.

Example 1:

Additional remuneration of arrears commission for 2008 to be paid in year 2009.

a. Use STD Schedule (Amendment 2004).
b. Remuneration in December 2008 will be taken as a basis for computation of MTD for Step [A] Bonus Formula.
c. Use a separate form when making MTD payment for current month remuneration and additional remuneration.
d. Form CP39A for additional remuneration MTD.
e. Form CP39 for current month MTD.

Example 2:

Additional remuneration of arrears commission for 2009 to be paid in year 2010.

a. Use formula computerised calculation method MTD 2009/’Kalkulator 2009’.
b. Click MTD calculation year 2009.
c. Select previously employed in current year.
d. Click Month of December.
e. Accumulated remuneration/MTD/Rebate/Deduction until before current month for current year (including from previous employer)
f. Do not input the current remuneration and just key in amount of arrears received as additional remuneration as well as EPF (if any). Clicks calculate.
g. Use Form CP39A to pay MTD for additional remuneration (arrears commissions).

If additional remuneration for the year 2009 is paid in the current year, the MTD calculation is as follows;

• Schedule of Monthly Tax Deduction for year 2009

The MTD calculation for Step 1 in the Additional Remuneration Formula shall be based on the normal remuneration for the month of December or last month of employment for the year by using the Schedule of Monthly Tax Deductions applicable for that year.

• Computerised Calculation Method

The MTD calculation shall take into account the total remuneration, deductions, rebate and MTD for year 2009.
 

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