Tax in Malaysia comes with varying regulations and frequent updates for individuals and businesses alike, it can be tough to keep up with these changes.
Even though some employers use all-in-one HR systems that offer compliance to stay on top of their game, as the year unfolds, one of the tax-related responsibilities Malaysian employers are required to do for their employees is preparing the EA and E form with the Inland Revenue Board, or Lembaga Hasil Dalam Negeri (LHDN).
In this article, we’ll guide you through understanding the EA Form Malaysia and Form E, it’s importance, and overall human resource development
Understanding EA Form Malaysia
As an employer operating in Malaysia, understanding the rules and regulations on payroll processes and taxation helps run your organization.
Employers or business owners are expected to prepare and provide the EA Form Malaysia for their employees as required by the Inland Revenue Board of Malaysia (IRBM).
Employers must prepare EA Form for every employee, regardless if they are full-time or part-time employees. As long as the employee has worked for more than seven days, and has received payment for their work, they are eligible for the EA Form Malaysia.
To comply with regulations, HR managers must correctly prepare the EA Form Malaysia, which should be distributed to employees before the end of February as required by the revenue board.
What is EA Form Malaysia?
The EA Form Malaysia is a statement of remuneration from employment, it is a statutory document that contains the summary of an employee’s total earnings from his/her employer for the year.
The EA Form Malaysia which can also be referred to or recognized as CP8A form or Borang EA, allows for individual tax returns to be put together and also includes statutory contributions paid from the past year.
Filling this form allows employees to file their taxes properly and enables them to accurately declare their earnings to LHDN.
What is the purpose of the EA Form?
With the EA form Malaysia, employees can determine their income tax bracket and help with the payment of personal income tax in the year.
The purpose of the EA Form is to make sure that the exact amount of earnings, deductions, contributions, exemptions, and any other taxes paid although the year is declared correctly in the employee’s income tax filing.
Another purpose of EA Form Malaysia is that it serves as a guide for tax payment and can also be used as a reference to declare or disclose the accurate amount of yearly earnings as well as deductions when filing income tax in Malaysia.
Who is in charge of preparing the EA Form?
Employers are expected to prepare EA Form Malaysia for their employees, this is required by the Inland Revenue Board of Malaysia (IRBM).
Although employers are not required to submit EA Form Malaysia to LHDN, neglecting to prepare it could lead to penalties including a fine of up to RM20,000, imprisonment for a maximum of six months, or both.
If an employee switches jobs multiple times within a year, they can have more than one EA Form. The HR manager of the organization must know how to prepare the forms correctly and distribute them to the company’s employees before the provided deadline.
What is included in the EA Form?
The EA Form Malaysia should include details on:
- Employee’s gross salary
- Supplemental compensation
- Contributions to private pensions done by by employers
- Current rebates
- Commission
- Bonus or other gratuities
- Allowances/perquisites (e.g. travel allowance, meal allowance)
- Benefits-in-kind (such as health insurance, company apartment, and car)
- Value of Living Accommodation (VOLA)
- Compensation for loss of employment
- Additional tax deductions
Understanding Form E for Tax in Malaysia
Aside from EA Form Malaysia, companies and business owners are expected to also submit another mandatory document for tax in Malaysia, which is Form E Malaysia.
Form E Malaysia is an essential report that must be submitted by the company to the LHDN. Due to recent updates, the LDHN no longer accepts manual entries from companies when filing Form E, therefore companies have to use the LHDN’s e-PCB system or an LHDN-approved payroll software.
Read next: The Top 5 Payroll Software Malaysia Teams Are Using in 2024
What is Form E Malaysia?
Form E Malaysia is a report submitted by employers to the IRB, declaring the total number of employees the company has and the list of employees’ income details yearly.
Form E Malaysia, also known as Borang E, is an annual report submitted by employers to the Malaysian Inland Revenue Board. It includes the total number of employees in the company and details of their income.
What is the purpose of Form E Malaysia?
Form E Malaysia is used by employers to report employment income, tax deductions, and other relevant information for their employees to the Inland Revenue Board of Malaysia.
It provides employees with information necessary for filing their tax returns for annual tax reporting and compliance with tax regulations.
Who is in charge of preparing Form E Malaysia?
Similar to the EA Form Malaysia, companies or employers are responsible for preparing and submitting Form E Malaysia, with the human resource department typically managing this task.
Companies registered with the Companies Commission of Malaysia (Sdn Bhd, Berhad, LLP), whether or not they have employees, as well as sole proprietors and partnerships with employees, are required to submit Form E Malaysia.
While sole proprietors and partnerships without employees are not obligated to prepare Form E Malaysia, it is advisable for them to maintain relevant details.
What is included in Form E Malaysia?
Form E Malaysia includes details of the company/employer’s name, identification number and reference number.
It also contains information such as:
- Number of staff employed by the company
- Amount of tax deductions annually
- Employee’s salaries
- Numbers of new employees hired
- Amount given as compensation
- Numbers of employees who have resigned and no longer work with the company.
When are the EA Form Malaysia and Form E Malaysia due?
The employer is expected to distribute the EA Form Malaysia to employees by the last day of February following the end of the financial year, which is the year immediately following the first year mentioned.
This requires employers to provide employees with an EA Form by the 28th of February of the assessment year.
Form E Malaysia, on the other hand, is submitted by companies or employers once ever year. For those who fill out the form online using the portal, the last day of submission in the succeeding year (year of assessment) is the 30th of April.
What are the penalties for late submission?
Failing to meet deadlines for tax in Malaysia can result in significant consequences, both in terms of monetary fines and other penalties. Employers are acutely aware of these implications and must prepare EA forms for their employees on time to avoid the penalties imposed for non-compliance.
Here are some of the penalties associated with both the EA Form Malaysia and Form E Malaysia:
Legal and monetary consequences
According to Section 83(1A) of the Income Tax Act 1967, Malaysian employers are mandated to prepare and submit EA Forms to their employees on the last day of February.
Companies who fail to comply with this requirement can get penalties, including monetary damages ranging from RM200 to RM20,000, and imprisonment for up to six months, or both.
When a company constantly submits late, the tax authorities will begin to closely review future submissions and it can tarnish the company’s reputation if not corrected.
Possibility of errors in taxing
Preparing the EA Form Malaysia and Form E Malaysia ahead of time gives employers ample time for thorough inspections, guaranteeing accuracy.
Data inaccuracy can lead to errors in tax calculations and payments, potentially leading to issues with tax authorities.
Employers should be reminded to also account for any change in employment status, such as promotions or resignations, and employee benefits while preparing EA Form Malaysia.
Risk of employee dissatisfaction
Submitting the EA Form Malaysia and Form E Malaysia ahead of schedule can alleviate the tax season rush for employees. It also demonstrates employers’ commitment to employee well-being and tax compliance.
When employers provide these forms early for tax in Malaysia, employees can concentrate on their tasks as planned. This enhances employee engagement and fosters trust in the employer, cultivating a more positive workplace culture.
Empowering HR Leaders for Tax Success
Timely submission of EA Form Malaysia and Form E Malaysia is crucial for both employees and employers for filing tax in Malaysia. It not only ensures compliance with tax regulations but also demonstrates an employers’ commitment to their employees’s financial security. That’s why it’s important to have the right HR tools by your side to ensure accuracy.
Omni helps HR teams stay up to date with the latest laws and regulations while streamlining the end-to-end employee management lifecycle. Our comprehensive payroll solution is tailored to Malaysia’s specific requirements. With features like support for MYR, automated tax calculations, and instant payroll reports, Omni can help HR teams simplify the preparation of EA Form Malaysia and Form E Malaysia, while ensuring compliance.
