Tax clearance letter for Employee

Tax Clearance Letter for Employee

1. Introduction

The SPC (Surat Penyelesaian Cukai) is a certification issued by LHDNM to employers regarding the tax affairs of employees who are terminating their employment, retiring, deceased, or planning to leave Malaysia. This guideline is intended to explain the procedures from the application’s receipt to the full settlement of any tax claims within the SPC.

2. Employer’s Responsibilities

Subsections under Income Tax Act 1967 (ACP 1967):

Subsection 83(3): Employers must notify LHDNM using Form CP22A/CP22B if they are ceasing to employ a worker who might be subject to tax due to the employment, not later than 30 days prior to the cessation or within 30 days after being informed of an employee’s death.
Subsection 83(4): Notification through Form CP21 is required for employees who might leave Malaysia for over three months, to be submitted no less than 30 days before the expected departure.
Subsection 83(5): Employers must withhold any dues payable to the employee who has stopped or will stop employment or plans to leave Malaysia for over three months. This withheld amount cannot be paid without LHDNM’s permission and should be held for 90 days following the notice’s receipt.

Exemptions:

Employers are not required to submit CP22A/CP22B for employees whose earnings are subject to Monthly Tax Deductions (PCB) or do not meet the minimum amount eligible for PCB.

3. Employee’s Responsibilities

Employees must ensure that their tax returns and assessments are complete and orderly for the current assessment year or until the end of their service to facilitate the SPC application. They have specific obligations depending on their eligibility for Monthly Tax Deduction as Final Tax (PCBCM):

Eligible for PCBCM: No need to submit the return for the current year of assessment if opting for PCBCM. The return for the termination year must be submitted the following year.
Not eligible for PCBCM: Must submit returns for both the current and termination years.

Employees intending to leave Malaysia:

Eligible for PCBCM: Only need to submit the return for the termination year.
Not eligible for PCBCM: Must submit returns for both the current and termination years.

4. Application Method for SPC

Applications must be submitted online through the e-SPC on MyTax portal, using the appropriate forms (CP22A for private sector terminations, CP22B for public sector terminations, and CP21 for employees leaving Malaysia). Supporting documents are required as listed in Appendix A.

5. LHDNM’s Responsibilities