Employment Tax

Malaysia | Important updates on tax clearance application and EPF registration requirements

Summary

In general, all Malaysian employers are required to submit a tax clearance application (via e-SPC) when their employees cease employment, retire, die or leave Malaysia for more than 3 months. Recently, on 1 November 2025, the Inland Revenue Board of Malaysia (IRBM) announced new updates to the operational guidelines for the tax clearance application that will impact both employers and individual taxpayers.

The detail

New updates for tax clearance application

1. Employers are no longer required to upload additional documents in the e-SPC system

The existing process requires employers to upload the following additional documents in the e-SPC system as part of the tax clearance application:

• Copy of EA Form for up to 3 years (subject to period of service)
• Copy of passport certified by the employer (all pages)
• Schedule of arrival in and departure from Malaysia (throughout Malaysian employment period)
• A copy of the Voluntary Separation Scheme (VSS) / Mandatory Separation Scheme (MSS) approval letter from IRBM or a copy of the VSS / MSS contract letter if the employee receives compensation / gratuity from the employee separation scheme

Effective 1 November 2025, the above documents are no longer required to be uploaded in the e-SPC system. The IRBM has updated their e-SPC system to remove the section “ E. Supported Documents ”.

However, it remains important to ensure that these documents are readily available, as the IRBM may request them from the employer or the person-in-charge of submitting the e-SPC, through official communications to the client or via a tax/payroll audit.

2. New requirement to submit a “Declaration of Resident Status”

In addition to the documents mentioned above, the IRBM has introduced a new submission requirement — the “Declaration of Resident Status,” which must be signed by the employee. A template of this declaration is available in Bahasa Melayu on the IRBM’s official website; however, an English version will also be accepted for submission. Please note that notwithstanding this declaration, the employee must submit a copy of his/her passport(s) (containing full pages from cover to cover that includes his/her employment period in Malaysia) and provide a travel schedule of arrival in and departure from Malaysia (throughout Malaysian employment period) to his/ her employer prior to permanent departure from Malaysia.

3. e-SPC applications are now available for amendments and additional submissions

Other than initial e-SPC submissions, employers are now required to submit e-SPC applications for amendments and additional remuneration (for example, revised or additional payments made after the initial e-SPC has been submitted). However, requests to cancel a submitted e-SPC must still be made directly to the IRBM office handling the employee’s income tax file or to a nearby IRBM office until the e-SPC platform supports this function.

Current Practice (Updated Per IRBM Guidelines)

Exemption from submitting the Notification For Cessation of An Employee’s Employment (Form CP22A/ Form CP22B)

Employers are exempted from submitting Form CP22A/ Form CP22B upon cessation of employment of their employees provided the following conditions are fulfilled:

1. Employees cease employment and the employment income is not subject to
2. Employees receive a retirement gratuity or benefit, but no actual retirement takes place, and the employee continues to work with the same employer.
3. For Malaysian citizen and non-Malaysian citizen employees:

Malaysian citizen employees

Non-Malaysian citizen employees

●      the employeesʼ monthly income is below the minimum threshold for Monthly Tax Deduction (MTD) eligibility; or ●      the employeesʼ monthly salary qualifies for monthly tax deductions under the Income Tax (Deduction from Remuneration) Rules 1994; and ●      the employees do not receive any gratuities or compensation upon cessation of employment.

●      the employeesʼ monthly income is below the minimum threshold for Monthly Tax Deduction (MTD) eligibility; or ●      the employee’s monthly salary qualifies for monthly tax deductions under the Income Tax (Deduction from Remuneration) Rules 1994; and ●      the employees do not receive any gratuities or compensation upon cessation of employment; and ●      the employees continue to be employed in Malaysia.

Employerʼs tax obligations for tax clearance application

• The e-SPC application must be submitted no later than 30 days before the expected date of cessation of employment/ expected date of departure from Malaysia/ no later than 30 days after being notified of the employeeʼs death.
• The employers must retain whatever amount of moneys due to the employees who cease employment/ depart from Malaysia for more than 3 months, until at least 90 days after the receipt by the IRBM of the e-SPC submission, or upon issuance of the tax clearance letter or any direction on the release of moneys by the Director General, whichever is earlier.
• The tax clearance letter will be issued to both the employer and the The status of the e-SPC application can only be checked by the employer through the e-SPC system in MyTax.

Employeeʼs tax obligations for tax clearance application

	Employee who is about to cease employment / retire	Employee who intends to leave Malaysia for a period more than 3 months
If eligible and chooses the Monthly Tax Deduction as Final Tax	Final tax return for the year of cessation of employment must be submitted by 30 April following the year of assessment.	Final tax return for employees leaving Malaysia must be submitted immediately after e-SPC submission has been made by the employer to complete the tax clearance process.
If not eligible to choose the Monthly Tax Deduction as Final Tax

The employee must settle any balance of tax payable for any year of assessment (as recorded in the IRBMʼs system) by the specified deadline, even if an appeal has been filed against that assessment.

Method of e-SPC Application

Type of Form	Method of Application
Form CP22A/ Form CP22B	●   Complete the required details in the e-SPC via MyTax ●   Upload the batch data file in .txt format (maximum 3MB)
Form CP21	Complete the required details in the e-SPC via MyTax

Actions by the IRBM regarding the e-SPC application

• e-SPC applications will be processed in accordance with the IRBM Client Charter, provided that all required documents and information are submitted and the specified criteria are met.
• The tax clearance letter will be issued to both the employer and the The status of the e-SPC application can only be checked by the employer through the e-SPC system in MyTax.
• The IRBM may impose travel restrictions under Section 104 of the Income Tax Act 1967 on employees who fail to settle any tax liabilities shown in the SPC.
• The IRBM may also initiate civil legal action under Subsection 107(4) of the Income Tax Act 1967 against employers who fail to pay the tax liabilities indicated in the employeeʼs SPC, if any.
• For assistance with the e-SPC submission process or the issuance of a tax clearance letter, employers/ employees may contact the IRBM Customer Care Officer (CCO). The list of CCOs for each state in Malaysia can be found on the IRBM website.

New Updates For Employee Provident Fund (EPF) 

Following our previous alert on 30 June 2025 regarding mandatory EPF contributions, the EPF Board has provided an update on the registration process for non-Malaysian employees.

In collaboration with the Malaysian Immigration Department, the EPF is collecting the necessary employee data to automatically register them under the employerʼs i-Akaun. Once processed, employers will receive notifications from EPF indicating whether each employeeʼs registration was successful or unsuccessful. Please see the comparison table below summarising the required steps:

Category	Successful Registration	Unsuccessful Registration
Notification from EPF	●      Employers receive notification of successful automatic registration; or ●      Employee data appears in i-Akaun	●      Employers receive notification of unsuccessful registration; or ●      No employee data appears in i-Akaun
Next step by the employer	Book the employeeʼs biometric verification appointment via the notification link. Appointments open in January 2026, as EPF currently supports only unsuccessful registrations.	Manually register the employee in i-Akaun via “Register EPF Member,ˮ then book the employeeʼs registration appointment using the link in the notification.
Employee action	Visit nearest EPF office to complete biometric verification starting January 2026.	Visit the nearest EPF office to register as an EPF member as soon as possible to update personal information and complete biometric verification.
Documents to bring to the EPF office	●      Original passport with a photocopy of the page bearing personal particulars and photograph ●      A copy of the electronic pass / original endorsed work permit with a photocopy of it ●      Completed registration form (Form KWSP 3) Can be downloaded from EPF official website / obtained directly from the EPF office
Timeframe for action by the employer and employee	Schedule for appointment via the link provided in the notification sent by the EPF, and employees are required to attend their scheduled appointments at the EPF office from January 2026 onwards.	Ideally within 7 days of receiving the notification, or proceed with manual registration immediately if no data appears in i-Akaun. Please ensure that this is completed before the first remittanceʼs deadline i.e by 15 November 2025

 

Start of EPF contributions

Employers may start contributing for October 2025 wages by 15 November 2025, once the registration is completed and employee data is available in the employerʼs i-Akaun.

Currently, withdrawal applications can only be made by the employee in person at any EPF office, together with the withdrawal form and relevant supporting documents. The application must be submitted at least two months before the expected departure date from Malaysia and no later than two years after departure. If no withdrawal is made within two years and the EPF account remains inactive, the contributions will be transferred to the Unclaimed Monies Account, and recovering the funds thereafter may involve a complex process.

In addition, employers may contact us to assess whether their non-Malaysian employees are eligible for exemption or non-applicability of EPF contributions. We can also assist in facilitating the assessment and waiver application process with the EPF Board as there are currently no official guidelines on exemptions and waivers.

How we can help

As the IRBM and EPF Board intensify their focus on compliance, documentation and digital reporting, it is crucial for employers and employees to proactively adapt to these regulatory changes. Early preparation will not only ensure smooth compliance but also minimise potential disruptions or unnecessary audits related to employeesʼ tax filings and EPF contributions. We encourage you to review your tax clearance processes and ensure compliance in registering and remitting EPF contributions for the non-Malaysian employees in a timely manner. Employers may reach out to us for further assistance on tax clearance applications and EPF contributions, where necessary. Together, we can help to navigate these changes and safeguard your organisationʼs compliance standing.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Hilda Liow
Partner

Lim Phing Phing
Partner

Wee Lay Har
Director

Loh Zi-Lynn
Senior Manager

Want to know when a Regional Alert is posted?

Simply follow our Vialto Alerts page on LinkedIn and posts will be displayed on your feed. To ensure you don’t miss one, once you’re on our LinkedIn page, click on the bell icon under the banner image to manage your notifications.

Further information on Vialto Partners can be found here: www.vialtopartners.com

Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.

© 2025 Vialto Partners. All rights reserved.