How to Make Tax Clearance in Malaysia
If you are leaving an employment due to expiry of contract, termination, resignation don’t forget to do tax clearance. The tax clearance will show any tax owe by you.
The tax clearance and settlement is needed before any new EP is issued. This is to separate the liability from each of the companies.
Departure from Malaysia for a Period Exceeding 3 Months – an employer is required to notify the LHDN of departure of an employee (most of the case will be expatriate) from Malaysia for a period of more than 3 months by the completion of Form CP21.
The employer is required to withhold any money in the employer’s possession owing to the expatriate who has ceased or is about to cease employment until 90 days after the IRB receives the Form CP21 or upon receipt of the tax clearance letter, whichever is earlier. The employer can then release the balance of money withheld from the employee after the settlement of the outstanding taxes (if any) as shown in the tax clearance letter.
What documents to Submit to LHDN
To do tax clearance in Malaysia easy, just follow the following steps :
- Check which tax office your tax record is registered
- The employer (HR) will complete CP21 Form and send it to Lembaga Hasil Dalam Negeri office not less than one month before their confirmed departure date. The form records the amount of income earned that year from 1 January to the date that employment terminates. The submission can also be made online via e-SPC.
- Submit EA Form of previous year, you should have this ready. Otherwise get it from your HR.
- Submit BE Form of current year, you can fill up this form based on the info from CP21 form prepared by your HR.
- Copy of the passport (all pages) for validation.
The LHDN Office SLA is 10 working days, if not much issue they normally can issue Tax Clearance Letter in 3-4 working days.
Your last month salary ?
Your HR will retains your last month’s salary to pay off any tax owed.
Any money owed by an employer after employment ends can only be paid once clearance has been given by the Inland Revenue Board. Any bonus or additional salary paid after the individual leaves the country is still taxable in Malaysia.
The salary will be released upon receiving the Tax Clearance Letter from LHDN.
Employment pass (EP) and professional visit pass cancellation
When you have done with the Tax Clearance, don’t forget to cancel your employment passes and professional visit passes before leaving the country. An application to cancel either an employment pass or a professional visit pass should be made by the pass holder’s sponsoring company.
It must be done at least three working days before or within one month of the intended departure or termination date, whichever is earlier.
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