We have received a few enquiries on this question recently – Does an employer need to notify the tax department when employing a new staff?
The increasing interest in this matter is due to the rising PCB tax audits by the Inland Revenue Board Malaysia, where one of the most common mistakes that employers have made is the failure to notify the tax department when hiring a new staff or when a staff is resigning.
Notice of employee commencing employment (Form CP 22)
As an employer, you are required to notify the Inland Revenue Board Malaysia (IRBM) within one month from the date of commencement of the employment of a new staff. Information required in the Form CP22 includes:
Name and address of employee
Nature of employment
Date of commencement of employment
Gross monthly salary
Expected duration of employment
Marital status of the employee
Name and address of employee’s previous employee
Notice of cessation of employment (Form CP 22A)
When a staff tendered his/her resignation, the employer is required to inform the IRBM not less than 1 month before the expected date of cessation of employment. This must be done by lodging Form CP22A to the nearest assessment branch. This form is also applicable to retirement and death of an employee.
However, the employer is exempted from doing so if
the income of the employees had been subjected to monthly tax deduction (MTD or PCB), or
where the employee’s monthly remuneration is below the minimum amount of income that is subjected to monthly tax deduction.
This is provided that the employee is not retiring from employment permanently.
Employee leaving Malaysia (Forms CP 21)
Form CP 21 must be submitted by the employer where he/she knows that the employee is leaving Malaysia for a period exceeding three months. The notice must be given not less than one month before the expected date of departure.
The notices must provide the following information:
Name and address of employee
Nature of employment
Reason for leaving
Date of cessation and/or departure
Income received or receivable for relevant periods to date of cessation of employment
And the employer is obliged to retain any moneys due to the departing employee until a tax clearance letter is issued by the assessment branch. If the employer fails to give notice of the employee’s cessation/departure, the Director General can impose a penalty and/or recover the taxes due from the employee directly from the employer.
The said employee should also ensure his/her personal tax returns are filed up-to-date. This will allow the IRBM to process his/her tax clearance letter quickly.
** The above forms must be submitted to the nearest assessment branch. Certain assessment branches may reject the form and direct the employer to submit the form to the said staff’s assessment branch where his/her tax matters are handled.
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