What Are The Tax Responsibilities Your Employer Must Follow? LHDN Lists 8 Key Facts

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Employers in Malaysia have been reminded that managing employee taxes is not just an administrative task, but a legal responsibility

The Inland Revenue Board (LHDN) recently outlined several tax-related obligations that employers are expected to fulfil to ensure compliance and avoid potential issues.

Here's a breakdown of what employers need to do:

1. Register for an employer tax number

Employers must register for an employer Tax Identification Number (TIN), also known as TIN E, through the MyTax portal's e-Daftar service, said LHDN corporate services department senior executive II Sharifah Hakimah Syed Abu Bakar.

2. Submit required tax forms

Companies are required to submit Forms E and C.P.8D.

Employers are also required to prepare and issue EA forms for private-sector employees and EC forms for government employees.

3. Keep employee information updated

Employers should regularly update details such as employees' marital status, number of children, and income information.

These details directly affect the calculation of Monthly Tax Deductions (PCB) from employees' salaries.

4. Inform employees about tax relief forms

Employees can submit Form TP1 to claim eligible tax deductions and rebates for PCB purposes, while Form TP3 is used to provide information about previous employment.

LHDN says employers should ensure workers are aware of these forms so they can receive the tax relief they qualify for.

5. Keep tax records for seven years

Documents related to income, PCB deductions, salary statements, and tax forms must be retained for up to seven years.

The records may be required for audit and compliance purposes.

6. Report new taxable employees within 30 days

Employers are required to notify LHDN when a new employee who is taxable or liable to tax joins the company.

The notification must be made within 30 days of the employee's start date through Form CP22.

Since 1 September, 2024, submissions must be made via the e-CP22 application on the MyTax portal.

7. Notify LHDN when an employee leaves

If an employee resigns, retires, or otherwise leaves the company, employers must submit Form CP22A for private-sector employees or Form CP22B for public-sector employees.

The form must be submitted at least 30 days before the employee's last day of work.

8. Report employee deaths

In the event of an employee's death, employers must notify LHDN within 30 days.

This allows the tax authority to process matters related to the employee's tax clearance letter.

Speaking on Bernama Radio's Tax Clinic programme, Sharifah said employers play a crucial role in ensuring proper tax administration and compliance.

She also advised employers with questions about taxation matters to seek clarification directly from LHDN or through official channels to avoid mistakes and misunderstandings.