Navigating Form EA and Form E
In Malaysia, the onset of a new year brings not just personal resolutions but also the critical task of preparing for the tax season—a period demanding diligent calculations and submissions for business owners, HR professionals, and employees. At the heart of this period are two pivotal documents: Form EA and Form E. These are not merely administrative requirements but foundational to effective tax management and compliance, serving as keystones for strategic tax planning.
Demystifying the Compulsory Tax Documents: Form EA and Form E
What is Form EA?
Labelled as the “Statement of Remuneration from Employment,” Form EA comprehensively details an employee’s earnings from their employer over the past year. This document is indispensable for employees to accurately file their income taxes and determine their tax bracket position. It includes a variety of employment earnings categories such as gross salary, overtime, commissions, bonuses, and several allowances and benefits. Mandatory for every employed individual who has worked for more than seven days, non-compliance carries stiff penalties.
Download the latest Form EA here:
Complicated? Here’s a summary of “What is Form EA?”:
Form EA, or the “Statement of Remuneration from Employment,” is a document that summarises an employee’s earnings over the year. Here’s what it involves:
- Purpose:
Helps employees file their personal income taxes accurately by declaring their yearly earnings to LHDN (Lembaga Hasil Dalam Negeri). - Who Needs It:
Every employer must prepare Form EA for employees who have worked more than seven days. This includes full-time, part-time, interns, or fixed-term employees. - Components:
- Gross salary
- Overtime payment
- Commission
- Bonus or other gratuities
- Allowances/perquisites (e.g., travel or meal allowances)
- Benefits-in-kind (health insurance, company car)
- Value of living accommodation (VOLA)
- Employer’s contributions to a private pension
- Compensation for loss of employment
- Form EA Deadline:
- 29th February 2024 (Employers must issue Form EA to employees)
- 29th February 2024 (Employers must issue Form EA to employees)
- Compliance:
Not submitting to LHDN but failing to prepare can result in penalties.
What is Form E?
Form E acts as an employer’s declaration to the Malaysian Inland Revenue Board (LHDN) of the count of employees, the total remuneration paid, and the tax deductions for the financial year. Mandatory for companies, sole proprietors, and partnerships with employees, the digital shift mandates the use of an LHDN-approved payroll system for submission, abandoning paper-based submissions in favour of a streamlined electronic approach.
Download the latest Form E here:
Here’s a quick summary of what “Form E” is all about:
Form E is an annual employer declaration, encapsulating employee earnings and deductions over the year. Critical details include:
- Purpose:
Reports the number of employees, total remuneration, and tax deductions to LHDN. - Who Must File:
- Companies registered with the Companies Commission of Malaysia (Sdn Bhd, Berhad, LLP) with employees
- Sole proprietors and partnerships with employees
- Not Mandatory But Recommended:
- Sole proprietors and partnerships without employees
- Submission Mode:
- Must be filed electronically via LHDN MyTax. Form can be generated through LHDN-approved payroll software such as CentralHR. Manual submissions are not accepted.
- Form E deadline:
- Available for submission via MyTax: 1st March 2024
- General Form E submission deadline: 31st March 2024
- E-filing submission deadline: 30th April 2024
- Key Considerations:
- Employers must include information about every employee, irrespective of their contract type (full-time, part-time, interns, fixed-term). Strict penalties apply for failure to declare.
What is Form CP8D?
Form CP8D is a declaration report and contains details of the employer’s company and a list of remuneration paid to each employee in a financial year.
- Important things to note about Form CP8D
- Form E would be considered complete only when Form CP8D is submitted within the stipulated due date.
- Form CP8D (both text and excel file) can be generated through LHDN-approved payroll software such as CentralHR. Manual submissions are not accepted.
- CP8D submission deadline
- Employers must submit Form CP8D by 31st March (together with Form E). The tax department only accepts this form online; you cannot furnish it in hard copy.
- CP8D late submission penalty
- Form CP8D is a part of Form E, and the latter will only be considered when the employer has filed the former within the due date. So, in case you have missed the deadline, be prepared to pay anything between RM200 and RM20,000 in penalties and/or serve a jail sentence of up to 6 months under Section 120(1)(b) of the Income Tax Act, 1967.
Streamlining With CentralHR
Facing the complex demands of generating these critical documents for a workforce can plunge businesses into a maze of complications and potential inaccuracies. CentralHR emerges as an indispensable solution in this landscape. With its LHDN-approved payroll software, CentralHR facilitates the effortless creation of Form EA and Form E, marrying compliance with convenience. This innovative tool extends beyond just simplifying submissions—it liberates HR departments to refocus on high-value strategic initiatives.
Strategic Tax Planning: A Proactive Approach
Effective management of Form EA and Form E is pivotal not only for compliance but also as a fulcrum for insightful tax planning. Here’s how you can leverage it:
- Start Early:
Proactively gather and verify necessary data well before deadlines to avoid errors and ensure accuracy. - Invest in Technology:
Utilize LHDN-approved platforms like CentralHR, which offer precision, compliance, and strategic payroll insights. - Educate Employees:
Conduct sessions explaining Form EA’s role in their personal tax filings, fostering a culture of diligence and early discrepancy detection. - Optimise Compensation Packages:
Structurally design compensation to maximise benefits within the legal framework, minimising tax liabilities where possible.
Frequently Asked Questions
Q: Is Form EA required for part-time employees?
A: Yes, Form EA is mandatory for all employees, including part-time, full-time, interns, or fixed-term contracts, provided they have worked for the employer for more than seven days.
Q: What’s the deadline for submitting Form E?
A: The deadline for filing Form E is 31st March of the following year. This is to report the company’s employment details and remuneration information for the preceding year.
Q: Can I submit Form E manually to LHDN?
A: No, LHDN no longer accepts manual submissions for Form E. Employers must submit via LHDN MyTax.
Q: How do I determine if my business needs to file Form E?
A: If you’re running a company registered with the Companies Commission of Malaysia (Sdn Bhd, Berhad, LLP) and have employees, or if you’re a sole proprietor or part of a partnership with employees, you must submit Form E.
Conclusion: Navigating Tax Season With Assurance
For Malaysian businesses, adeptly navigating the intricacies of Form EA and Form E submissions isn’t just about meeting statutory obligations—it’s about seizing an opportunity for strategic tax planning and proactive workforce management. With an in-depth comprehension of these critical forms, bolstered by CentralHR’s cutting-edge software solution and a nuanced approach to tax planning, businesses can confidently approach the tax season, ensuring both adherence and optimisation of their fiscal strategy.
In the evolving tax landscape, staying informed about changes in legislation, leveraging advanced technology for operational efficiency, and adopting forward-thinking tax strategies are not just beneficial—they are essential for enduring success and growth.
Contact us to learn more about CentralHR software and services.
