An income tax clearance letter from Malaysian Inland Revenue (LHDN) indicates whether your employee may be liable for any outstanding income tax payments.
After receiving this letter, the employer will release the balance of the money withheld from the employee once the employee has settled any outstanding taxes (if any) indicated on the tax clearance letter/certificate.
Both Malaysians and expatriates are required to obtain a Tax Clearance Letter or Certificate (Surat PenyelesaianCukai).
An employer (usually the Human Resources Department) must complete one of the following forms:
Submitting can be done online through e-SPC (by the employer only) or manually through the LDHN office that handles your income tax file.
Upon the death of a taxpayer, the beneficiary must inform the taxpayer’s employer; thereafter, the employer must notify LHDN immediately.
Employers are required to notify LHDN at least 30 days before the expiration of an employee’s employment contract, resignation or termination of employment, or departure from Malaysia.
After death, the Next-of-Kin must apply within 30 days.
When an employee ceases employment, the employer does not need to submit any special forms to the EPF or SOCSO.
If a tax clearance application is not submitted on time, it may be subject to a penalty. There will be fines ranging from MYR 200 to MYR 20,000, as well as imprisonment for a period of up to six months. LHDN may take legal action against the employer who fails to pay the outstanding taxes under the Tax Clearance Letter.
It will take LHDN ten working days to process and issue the Tax Clearance Letter if the employer submits all the required documents.
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