Malaysia’s Finance Act 20151 was gazetted on 29 December 2015, and contains measures pertaining to the filing of Form E by employers, the Monthly Tax Deduction (“MTD”) calculation in respect of additional remuneration received which relates to years prior to 2016, and penalties in cases of non-compliance with the MTD rules.
The Finance Act 2015 embodies the budget measures featured in the budget announcement of 23 October 2015 (for prior coverage, see GMS Flash Alert 2015-136, 10 November 2015). The Finance Act 2015 contains some notable changes as compared with the Finance Bill 2015, which we highlight below.
Employers and employees should take note as the changes described in this newsletter are additional to what appeared in Finance Bill 2015 last autumn. Employers will have to comply with e-filing rules for Form E starting with the year ending 31 December 2016. Failing to follow the proper procedures could open the employer to scrutiny and sanctions.
In addition, there are new tax rates applying MTD to a broader range of salaries and for calculating MTD for additional remuneration received which relates to years prior to 2016. Non-compliant employers may be subject to the new penalty and sanction rules.
It is mandatory for an employer (a company) to e-file the Form E for the year ending 31 December 2016 (year of assessment (“YA”) 2016 in Finance Bill 2015) to the Inland Revenue Board (“IRB”) electronically. Form E includes various details concerning the employer and details relating to the company’s employees who earn above a certain amount.
An employer can still submit the Form E for the year ended 31 December 2015 to the IRB via manual submission (i.e., complete the printed return and submit it to the IRB). Even though it is not mandatory to e-file the 2015 Form E, employers are encouraged to e-file 2015 Form E to get familiar with the e-filing process. It must be submitted by 31 March 2016.
New rules amend Rule 17 and Schedule of the Income Tax (Deduction from Remuneration) Rules 1994 [P.U. (A) 507/1994].
The Income Tax (Deduction from Remuneration) (Amendment) Rules 2015 [P.U. (A) 311/2015]2 came into operation on 1 January 2016, to provide for the following changes to the MTD rules:
Under Rule 13 on the notification of cessation of payment of remuneration by an employer, such notification is to be done in the following manner:
- A foreign national who leaves employment and the country: Must be notified via submission of Form CP21 (“Notification by Employer of Departure from the Country of an Employee”);
- Retiree: Must be notified via submission of Form CP22A (“Tax Clearance Form for Cessation of Employment of Private Sector Employees”); and
- Resigning employee: Must be notified via letter from the employer indicating the employee’s last day of employment with the company.
2 The Income Tax (Deduction from Remuneration) (Amendment) Rules 2015 guidelines and detailed information (in Malaysian). Also see 29-12-2015, P.U. (A) 311/2015, Income Tax (Deduction from Remuneration) (Amendment) Rules 2015 – Income Tax Act 1967 on the e-Federal Gazette Official Portal Web site (in English).
MYR 1 = EUR 0.21/USD 0.23/AUD 0.33/GBP 0.161
For additional information or assistance, please contact your local GMS or People Services professional or:
Datin Pauline Tam (with the KPMG International member firm in Malaysia)
tel. +60 (3) 7721 7017
The information contained in this newsletter was submitted by the KPMG International member firm in Malaysia.
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