ORP=  Wages/26

Hourly rate of pay =  ORP/(Normal working hour)

*Overtime shall be paid not later than the last day of the next wage period

• Where an employer commences to employ an individual who is or is likely to be chargeable to tax in respect of income in respect of gains or profits from the employment
• The employer shall not later than one month thereafter give written notice to the Director General
• The form (CP22) has been updated in year 2021

• Changing the size, shape, composition, properties or quality of the material
• Installation of tools and components into machines or equipment
• Changing the quality of finished goods
• In relation to petroleum, any process of separation, purification, conversion, refining and blending

Advantages of a SDN BHD

• Personal wealth protection
• Continuous existence
• Transferable ownership
• Lower tax rate
• Higher tax saving
• Foreigner is also allowed to set up a SDN BHD

A deduction shall be allowed for the costs of renovation and refurbishment of business premise incurred by the person from 1 March 2020 until 31 December 2021 and used for the purpose of its business

Transfer pricing generally refers to intercompany pricing arrangements for the transfer of goods, services and intangibles between associated persons

According to Para 4 (1) of the Income Tax (Transfer Pricing) Rules 2012 within the Income Tax Act 1967, ‘A person who enters into a controlled transaction shall prepare a contemporaneous transfer pricing documentation.’

In Section 139 of the Income Tax Act (ITA), control refers to both direct and indirect control. Under the Guidelines, two companies are associated companies with respect to each other if one of the companies participates directly or indirectly in the management, control or capital of the other company; or the same persons participate directly or indirectly in the management, control or capital of both companies.

However, the Malaysian TP Guidelines 2012 further provide additional leeway for smaller tax payers to ease their compliance burden as follow:

Malaysian companies are required to prepare a full-fledged transfer pricing documentation if they have:

• Gross income exceeding RM25 million; and
• The total amount of related party transactions exceeding RM15 million or
• Provision of financial assistance exceeding RM50 million (not applicable for financial institutions)

Any person which falls outside the above scope may opt to fully apply all relevant guidance as well as fulfill all Transfer Pricing Documentation requirements in the Guidelines; or alternatively may opt to comply with Transfer Pricing Documentation requirements under paragraph 25.4(a), (d) and (e) only. In this regard, the person is allowed to apply any method other than the five methods described in the Guidelines provided it results in, or best approximates, arm’s length outcomes.

• Individual
  • Individual and dependent relatives RM 9,000.00
  • Education fees (Self) RM 7,000.00 (Restricted) 
  • Lifestyle – Expenses for the use / benefit of self, spouse or child in respect of: RM 2,500.00 (Restricted)
    • Purchase of books / journals / magazines / printed newspapers / other similar publications (Not banned reading materials)
    • Purchase of personal computer, smartphone or tablet (Not for business use)
    • Purchase of sports equipment for sports activity defined under the Sports Development Act 1997 and payment of gym membership
    • Payment of monthly bill for internet subscription (Under own name)
  • Lifestyle – Purchase of personal computer, smartphone or tablet for self, spouse or child and not for business use RM 2,500.00 (Restricted)
    • (Additional deduction for purchase made within the period of 1st June 2020 to 31st December 2020)
  • Life insurance and EPF INCLUDING not through salary deduction RM 7,000.00 (Restricted)
  • Education and medical insurance INCLUDING not through salary deduction RM 3,000.00 (Restricted)
  • Contribution to the Social Security Organization (SOCSO) RM 250.00 (Restricted)
  • Disabled individual RM 6,000.00
• Family
  • Medical treatment, special needs and carer expenses for parents (Medical condition certified by medical practitioner) RM 5,000.00 (Restricted)
    • OR
      • Restricted to 1,500 for only one mother
      • Restricted to 1,500 for only one father
  • Basic supporting equipment for disable self, spouse, child or parent RM 6,000.00 (Restricted)
  • Medical expenses for serious diseases for self, spouse or child RM 6,000.00 (Restricted)
  • Complete medical examination for self, spouse, child RM 500.00 (Restricted)
  • Husband / wife / payment of alimony to former wife RM 1,000.00 (Restricted)
  • Child care fees to a registered child care centre / kindergarten for a child aged 6 years and below RM 3,00.00 (Restricted)
  • Purchase of breastfeeding equipment for own use for a child aged 2 years and below (Deduction allowed once in every 2 years of assessment) RM 4,000.00 (Restricted)
  • Disabled husband / wife RM 3,500.00
  • Disabled child RM 6,000.00
    • Additional exemption of RM8,000 disable child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities
• Children
  • Each unmarried child and under the age of 18 years old RM 2,000.00
  • Each unmarried child of 18 years and above who is receiving full-time education ("A-Level", certificate, matriculation or preparatory courses) RM 2,000.00
  • Each unmarried child of 18 years and above that: RM 8,000.00
    • Receiving further education in Malaysia in respect of an award of diploma or higher (excluding matriculation/ preparatory courses)
    • Receiving further education outside Malaysia in respect of an award of degree or its equivalent (including Master or Doctorate).
    • The instruction and educational establishment shall be approved by the relevant government authority
• Individual - Special for YA2020
  • Domestic travel expenses - (Accommodation expenses at premises registered with the Ministry of Tourism, Arts and Culture Malaysia and entrance fees to tourists attractions incurred on or after 1st March 2020) RM1,000.00 (Restricted)
  • Deferred Annuity and Private Retirement Scheme (PRS) - with effect from year assessment 2012 until year assessment 2021 RM3,000.00 (Restricted)

Employee Provident Fund (EPF)

According to Section 41 (1) of the EPF Act 1991, an employer must register with the EPF within seven (7) days from the date the employer becomes liable to contribute, that is as soon as an employee is hired

- An employer is defined as a person with whom an employee has a contract of service or apprenticeship with
- An employee is defined as a person who is employed under a contract of service or apprenticeship. The contract of service or apprenticeship can be written or oral, expressed or implied

Minimum age: Employment age is subject to Children and Young Persons (Employment) Act 1966.
Maximum Age: 75 years

Contribution for any given month must be paid on or before the 15^th of the month

Contribution rate shall be 11% from employee and 12% / 13% from employer
* Malaysian below 60 years old)

Payment Liable for EPF Contribution

In general, all payments which are meant to be wages are accountable in your monthly contribution amount calculation. These include:

• Salary
• Payment for unutilised annual or medical leave
• Bonus
• Allowance
• Commission
• Incentive
• Arrears of wages
• Wages for maternity leave
• Wages for study leave
• Wages for half day leave
• Other payments under services contract or otherwise

Social Security Organisation (SOCSO)

Employer and its employees must be registered with SOCSO not later than 30 days on which the Act becomes applicable to the industry

Employers are required to pay monthly contributions for each eligible employee according to the rate specified under the Employees’ Social Security Act, 1969. These contributions are divided into two (2) types, namely:

Contributions of the First Category
- For employees who are less than 60 years of age, contributions payable by employers and employees are for the Employment Injury Scheme and the Invalidity Scheme.
- The rate of contribution under this category comprises 1.75% of employer’s share and 0.5% of employees’ monthly wages according to the contribution schedule.
Note: All employees who have not reached the age of 60, must contribute under the First Category except for those who have attained 55 years of age and have no prior contributions before they reach 55 due to non-eligibility under the Employees’ Social Security Act, 1969.

Contributions of the Second Category
- The rate of contribution under this category is 1.25% of employees’ monthly wages, payable by the employer, based on the contribution schedule. All employees who have reached the age of 60 must be covered under this category for the Employment Injury Scheme only.
Note: For eligible new employees who are 55 years of age, they must be covered under the Second Category.

* Contribution rates are capped at an assumed monthly salary of RM4,000.00

Contribution for any given month must be paid on or before the 15^th following of the salary month

Wages subject to SOCSO contribution:

All remuneration or wages stated below and payable to staff/ workers are subject to SOCSO contributions:

1. Salary/ Wages (Full/ Part time, Monthly/ Hourly)
2. Overtime payments
3. Commission
4. Paid leave (Annual, sick and maternity leave, rest day, public holidays)
5. Allowances
6. Service charge

Wages NOT subject to SOCSO contribution:

The following wages or remuneration payable to staff/ workers are NOT subject to SOCSO contributions:

1. Payments by employer to any pension or provident fund for employees
2. Mileage claims
3. Gratuity payment(s) for dismissal or retrenchments
4. Annual bonus

Employment Insurance Scheme (EIS)

Employer and its employees must be registered with SOCSO not later than 30 days on which the Act becomes applicable to the industry

All employers in the private sector are required to pay monthly contributions on behalf of each employee. (Government employees, domestic workers and the self-employed are exempt)

An employee is defined as a person who is employed for wages under a contract of service or apprenticeship with an employer. The contract of service or apprenticeship may be expressed or implied and may be oral or in writing. 

All employees aged 18 to 60 are required to contribute. However, employees aged 57 and above who have no prior contributions before the age of 57 are exempt. 

* Contribution rates are capped at an assumed monthly salary of RM4,000.00

Contribution for any given month must be paid on or before the 15^th following of the salary month

Contribution rate shall be 0.2% from both employee and employer

Wages subject to EIS contribution:

All remuneration or wages stated below and payable to staff/ workers are subject to EIS contributions:

1. Salary/ Wages (Full/ Part time, Monthly/ Hourly)
2. Overtime payments

Wages NOT subject to EIS contribution:

The following wages or remuneration payable to staff/ workers are NOT subject to EIS contributions:

1. Payments by employer to any pension or provident fund for employees
2. Mileage claims
3. Gratuity payment(s) for dismissal or retrenchments
4. Annual bonus

Potongan Cukai Bulanan (PCB)

Also known as Monthly Tax Deduction (MTD) which is a system of tax recovery where employers make deductions from their employees’ remuneration every month in accordance with the MTD Schedule. This is mandatory.

Employer can register and calculate at any time before payment of salaries to employees and pay to LHDN within 15 days of the following month

Employer's responsibilities under the MTD Rules are as follows:
- Deduct the MTD from the remuneration of employee in each month or the relevant month in accordance with the Schedule of Monthly Tax Deductions or Computerised Calculation Method and pay to the Director General. 
- Make additional deductions from employee's remuneration in accordance with the direction given by the Director General under Rule 4 of MTD Rules.
- Employer shall pay to the Director General, not later than the fifteen day of every calendar month, the total amount of tax deducted or should have been deducted by him from the remuneration of employees during the preceding calendar month.
- Furnish a complete and accurate employees' information of the following in a return when submitting MTD payments/additional deductions: 
 (i) income tax number (if any);
 (ii) name as stated on identity card or passport;
 (iii) new and old identity card number/police number/army number or passport number (for foreign employee); and
(iv) MTD/additional deductions amount.

Human Resource Development Fund (HRDF)

• Malaysia Human Resources Development Fund (HRDF) has expanded the coverage of the PSMB Act 2001 with effect from 1 March 2021
• Who are eligible under the expansion of the Act?
  • Malaysian employers across all sectors 
  • With a minimum of ten (10) local employees
• HRDF is the levy collected by way of legal authority on eligible employers in Malaysia which is used for training, developing and upgrading the skills of their local employees, apprentices and trainees through training grants
• The payment of the HRDF levy is the responsibility of employers which they are not permitted to deduct the wages of employees under any circumstances for the payment of the levy
• Similar with EPF, all payment of the levy shall be made by the employer not later than the fifteenth day of the month immediately following the month in respect of which those payments fall due
• Form 1 is avaible for online submission HERE

Form E

Form E (Borang E) is required to be submitted by every employer (company/enterprise/partnership) to LHDN (Inland Revenue Board, IRB) every year not later than 31 March.

Who Needs to File Form E?

All companies. LHDN: “Every employer shall, for each year, furnish to the Director General a return in the prescribed form…”

Due Date for Submission of Form E

• Subsection 83(1) of ITA 1967 stipulates that the form must be furnished by every employer before or on 31 March. Form E will only be considered complete if C.P. 8D is furnished before or on the due date for submission of the form.

Grace Period for Submission of Form E for The Year of Remuneration 

* Employers which are companies are compulsorily required to furnish Form E via e-Filing (Form e-E) with effect from the Year of Remuneration 2016.

• Form E furnished via e-Filing / postal delivery after the due date for its submission shall be deemed to be received within the stipulated period if it is received before or on 30 April (e-Filing) / within 3 working days (postal delivery).

• Failure to furnish within the allowable period will result in the imposition of compound under paragraph 120(1)(b) of the Income Tax Act 1967 (ITA 1967) based on the due date for submission of the form.

Form C.P. 8A / C.P. 8C (EA / EC) to be Rendered to Employees

• Pursuant to the provision under subsection 83(1A) of ITA 1967, employers are required to prepare Form C.P. 8A / C.P. 8C (EA / EC) for the year ended and render the completed form to all their employees before or on 28 February.

FORM E will only be Considered complete if C.P.8D is Furnished

C.P. 8D Format – Method of Submission by Employers for The Year of Remuneration

Employers are required to furnish C.P. 8D format to LHDNM via any of the methods stated below:

DORMANT Companies must file FORM E

Companies which are dormant and/or have not commenced business are required to furnish the Form E with effect from year of assessment 2014.

E-Filing System Opens on 1 March

The e-Filing system for submission of Form E for the year of Remuneration will be opened beginning 1 March.

Penalties up to RM20,000 or 6 Months Imprisonment

Please be advised that it is the employer’s responsibility to complete the form E and return it promptly to the Inland Revenue Board.

Penalties ranging from RM200 to RM20,000 or to imprisonment for a term not exceeding 6 months or both will be imposed if you fail to comply with the stipulated filing date.

Prefill of Remuneration Particulars In e-Filing

To facilitate taxpayers’ use of e-Filing in line with current technological development, LHDNM is further reinforcing its e-Filing system by obtaining remuneration particulars of taxpayers from their employers for prefill in their respective e-Filing forms. Prior to signing and sending the forms electronically, taxpayers using e-Filing may alter the prefilled particulars if there’s a change.

Employers are encouraged to furnish the particulars online using e-Data Praisi which can be accessed via the LHDNM Official Portal before or on 22 February. The format for Information_Layout for Prefill can be obtained from the LHDNM Official Portal. To ensure compliance with the required format, format check can be done via e-Data Praisi. Particulars furnished are acceptable as C.P. 8D particulars for Form E. Employers who have submitted information via e-Data Praisi need not complete and furnish Form C.P. 8D. Enquiries can be e-mailed to bantuan_praisi@hasil.gov.my.

We do provide the professional accounting services and secretarial services to make sure your company is comply with the Companies Act 2016. Kindly refer to the details of our Malaysia services at OUR SERVICES. Please feel free to contact us at +607-2254911 should you need any further clarification. Or you can just click HERE to contact us directly.

For more information, you may refer to http://www.ssm.com.my/Pages/Home.aspx

• MITI approval letter (Please refer to our Facebook page for the guide to get the letter)
• Employer authorized letter