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Things To Know About Personal Tax Clearance for Employers when Employees Leave The Company
Being an employer is never easy when you have to deal with different issues of your business. But did you know? When employees are no longer working for the company, this responsibility also falls on the shoulder of employers according to the Malaysian Income Tax Act 1967. Employers have the obligation to inform the Malaysian Inland Revenue Board (MIRB) about cessation of employment, retirement, death or departure from Malaysia of an employee.
Employers have to adhere to Operational Guidelines on procedures for application of tax clearance letter for Individual issued by MIRB on 12 February 2016.
The Tax Clearance Letter (Surat Penyelesaian Cukai (SPC)) is a letter issued by MIRB to notify the employer of a deceased / retiring / resigning employee’s tax liability to enable the employer to make the final payment of salary / compensation / gratuity to the employee.
Employers need to make the application when the employee is:
- Leaving Malaysia for a period exceeding 3 months; OR
- Resigning from employment; OR
- Retiring; OR
- Death of an employee
Responsibility of Employer
- Required to notify MIRB and apply for SPC not later than 30 days before the date of the employee’s expected date of departure / termination of employment or, in the case of death, within 30 days after the death. (Shorter written notice with reasonable reasons for MIRB is possible.)
- Applying for the SPC either through online (e-SPC) or through physically submitting forms to MIRB branch that manages the respective employee’s income tax file.
- Required to retain whatever amount of money due to the employee (e.g. salary / compensation / gratuity) until 90 days after the MIRB receives the notification, or after SPC is issued. Then, the employer is permitted to release the money withheld. In practice, the employer would normally release the money after obtaining the SPC.
Forms Require Employers to Fill Up
- Form CP21 (Notification by Employer of Departure from the Country of an Employee); OR
- Form CP22A (Tax Clearance Form for Cessation of Employment of Private Sector Employees); OR
- Form CP22B (Tax Clearance Form for Cessation of Employment of Public Sector Employees); AND
- SPC request checklist.
Exemption from Providing Cessation of Employment
- The income of the employee is subject to monthly MTD and deduction has been made by the employer; OR
- The monthly income of the employee is below the minimum amount subject to the MTD;
- and where it is known to the employer that the individual is to be employed elsewhere in Malaysia.
Non-compliance and Penalty
Employers who fail to comply with the requirements might be fined for an amount between MYR 200 and MYR 20,000 and imprisonment for up to 6 months along with becoming liable for the employees’ outstanding tax obligations.
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