In the world of corporate governance, the transition into a new calendar year signifies more than just a fresh start, it marks the beginning of the annual income tax and payroll documentation reporting cycle. For businesses, the EA Form and E Form are not merely administrative hurdles, they are critical benchmarks of a company’s financial transparency and commitment to its workforce.

Ensuring these filings are managed accurately not only safeguards a company’s reputation, but provides employees with the clarity they need for their own tax obligations, avoiding potential fines and legal liabilities. 

To help navigate these statutory obligations, here is a guide to the key requirements for this filing season.

1. EA Form: Employee’s Annual Income Declaration 

What Is EA Form?

The EA Form, officially known as Borang EA or the Statement of Remuneration from Employment, is a form provided by employers to employees. This document serves as the official record of an employee's earnings including: 

• Gross salary & wages including:
  • Bonuses
  • Overtime pay
  • Commissions
     
• Allowance and prequisites both taxable and non-taxable including:
  • Travel allowance
  • Housing allowance
  • Lifestyle allowance
  • Insurance
  • Loan waiver
  • Loan interest
  • Club memberships
  • Scholarships
  • Gift vouchers
  • Etc
     
• Benefits-in-kind (BIK) that although not convertible into money, carry monetary value
  • Company car
  • Employee discounts
  • Electronic devices
  • Etc
     
• Compensation for loss of employment
   
• Statutory contributions
  • Employees Provident Fund (EPF)
  • Social Security Organization (SOCSO) 
  • Employment Insurance System (EIS)
     
• Monthly tax deductions (MTD/PCB) that are already remitted to LHDN

Deadline for EA Form Submission to Employee

While EA Form does not need to be submitted to LHDN by the employer, failure to provide employees with the document by the last day of February (28 February) may result in a fine of up to RM20,000, imprisonment for a term not exceeding six months, or both. 

Common Mistakes To Avoid

• The Part F Reporting Oversight
  A major area of non-compliance is the omission of tax-exempt items in Part F of the EA form. Even though items such as petrol, travel allowance, and toll allowances up to RM6,000, childcare allowances up to RM3,000, and one unit of communication device whether registered in the employee’s or employer’s name are not taxable, they must be declared

• The "Non-Cash" Misconception
  Employers often assume Benefits-in-Kind (BIK) like company cars, fuel, or accommodation aren't taxable because there is no direct cash payment. However, since these benefits carry monetary value, they must be valued according to LHDN’s guideline using the prescribed or formula methods

• Overlooking Perquisites
  Cash benefits or items convertible into money such as scholarships, credit card facilities, club memberships, gift vouchers, or insurance, are taxable employment income

• The "Cash" Distinction
  While monthly telephone/broadband bills are exempt (limited to one line), any fixed telephone allowance provided in cash is fully taxable

• Forgetting Former Employees 
  Regardless of the former employee’s current employment status, businesses are legally required to provide the EA form covering their specific tenure at the company

• The “Child Relief” Misconception
  It is a common misconception that claiming child relief through the payroll system is separate from the annual tax filing. In reality, claiming through payroll (via Form TP1) simply allows the employee to enjoy the tax benefit monthly through higher take-home pay. During the final e-Filing, these claims, whether for Ordinary Child Relief (RM2,000) or Higher Education Relief (RM8,000), are formalized. Employees should ensure that the child relief data on their EA Form is aligned with their actual eligibility to avoid discrepancies during the final submission to LHDN.
  However, if an employee did not declare these reliefs through the monthly payroll, the absence of this data on the EA Form does not forfeit the claim, they may manually include the eligible relief amounts during their annual tax submission to LHDN to receive a tax refund.

2. E Form: Employer’s Annual Tax Declaration 

What Is E Form?

While the EA form remains with the individual, the E Form is the formal declaration submitted by the business to the Inland Revenue Board Malaysia (LHDN). This report covers:

• Number of staff employed by the company
• Amount of tax deductions annually 
• Employee’s salaries 
• Numbers of new employees hired
• Amount given as compensation
• Numbers of employees who have resigned and no longer work with the company

Businesses Required to Submit Form E

All employers registered with Companies Commission of Malaysia (popularly known as Suruhanjaya Syarikat Malaysia or SSM) including Sdn Bhd, Berhad, and Limited Liability Partnerships (LLP), sole proprietors, or partnerships are required to submit Form E.

Although sole proprietors and partnerships without employees are not required to submit Form E, they are still encouraged to do so for record-keeping purposes.

Deadline for E Form Submission to LHDN

Businesses are required to submit their E Form digitally via the MyTax portal by the last day of March (31 March). Late filing or non-submission may result in a fine of up to RM20,000, imprisonment for a term not exceeding six months, or both. 

Common Mistakes To Avoid

• Not Filing for Dormant Company 
  Companies who have no employees, no revenue, never commenced operations since the date it was incorporated/ established, or had previously been in operation or carried on business but has now ceased operations or business are required to submit their Form E by indicating “NIL” by the deadline

• CP8D and Form E Mismatch
  The CP8D is a detailed employee income report that is required to be submitted alongside Form E. It provides individual breakdowns of each employee’s income, including salary, benefits, and contributions to statutory bodies such as EPF and SOCSO. 
  Precision is also required when reconciling the E Form with the CP8D attachment. The figures declared in both forms must align seamlessly. Any discrepancy can potentially result in system rejection or an audit query.

Navigating the complexities of essential tax documentations like the EA and E form requires more than just record-keeping, it requires a proactive approach to ever-evolving LHDN standards. Beyond mere statutory compliance, the seamless execution of the annual filing cycle reflects the institutional dedication to transparency and operational integrity. 
 

At Thelyx, we provide end-to-end support to ensure your business meets its statutory obligations without the stress of administrative errors. Contact us today.