Basis for Taxation
- Income tax paid by the employer is treated as a perquisite under Section 13(1)(a) of the Income Tax Act 1967.
- This benefit is added to the employee’s gross employment income for taxation in the year the tax liability is determined.
Monthly Tax Deduction (PCB)
- Employers must deduct tax from employees’ salaries to account for the perquisite.
- If salaries cannot cover the deduction, employers can apply for installment payment approval from LHDNM.
Responsibilities of Employers
- Tax Deductions: Deduct and remit monthly taxes for employee perquisites.
- Annual Filing:
- Submit employer tax declarations (Form E) by 31 March of the following year.
- Issue employee remuneration statements (Form EA) by the end of February.
- Employee Departure: Notify LHDNM using Form CP21 when employees leave Malaysia and ensure all taxes are settled before releasing final wages.
Responsibilities of Employees
- Notify LHDNM within two months of arriving in Malaysia for taxable employment.
- Submit annual tax returns (BNCP) by 30 April (non-business income) or 30 June (business income).
- Declare taxable income, including perquisites, and ensure timely payment of taxes.
Non-Compliance Penalties
- Failure to file tax returns or notify taxable income may result in fines (RM200 to RM20,000), imprisonment (up to six months), or both.
- Penalties of up to three times the unpaid tax may also apply.
Tax Settlement on Termination or Departure
- Employers must withhold final wages until tax clearance is obtained from LHDNM.
- Employees leaving Malaysia may be subject to accelerated tax assessments to ensure full settlement before departure.
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