Key Takeaways
- Employers must submit EA form (or Form EA), an annual remuneration statement, to all employees.
- The EA Form contains important details regarding an employee’s earnings from the employer for the previous assessment year.
- According to Section 83(1A) of the Income Tax Act 1967, employers must prepare and submit EA Form no later than the end of February.
- Companies are encouraged to prepare submit EA Form early to ensure data accuracy and prevent errors that may cause incorrect tax calculations.
- Employers can prepare for the tax season by utilising payroll systems or software, conducting training or seeking a tax professional.
For every employer in Malaysia, the annual task to submit EA form is an essential aspect of financial and tax management.
This process, which involves providing detailed remuneration statements to employees, not only adheres to legal requirements but also facilitates smoother tax filings.
In this article, we delve into the best practices and strategies to effectively submit EA forms, ensuring compliance and efficiency in handling this crucial aspect of your business operations.
What is an EA Form?
An EA Form, or Form EA, is an annual statement of remuneration provided to employees, playing a crucial role in their income tax filing process.
Employees are obligated to prepare and distribute the EA Form to all their employees, including full-time, part-time, or fixed-term staff, by the end of February every year.
This requirement applies to employees who have been employed for a minimum of seven days and have received compensation for their work.
While there is no need for employers to submit the EA Form to Malaysia’s Inland Revenue Board (LHDN), they must share the document with their employees for accurate tax filing and assessment.
The EA Form contains vital information for employees to file their income taxes accurately, including:
- Gross salary
- Overtime pay
- Commissions
- Bonus or other gratuities
- Allowances or perquisites
- Benefits-in-kind
- Value of Living Accommodations (VOLA)
- Pensions
- Statutory contributions
- Monthly tax deductions (MTD) in the financial year
- Employer contributions to private pensions
- Compensation for loss of employment
Read More: What is a Personal Loan for Self Employed in Malaysia
Why Companies Should Submit EA Form Early in Malaysia
1. Avoid Penalties and Legal Consequences
Under Section 83(1A) of the Income Tax Act 1967, all Malaysian employers are mandated to prepare and submit EA Forms to their employees no later than the last day of February.
If employers fail to prepare and render the EA Form by the deadline, they will incur fines ranging from RM200 to RM20,000, or face imprisonment for up to six months, or both.
2. Improve Accuracy and Reduce Error
Early preparation of the EA Form allows employers sufficient time for thorough checks, ensuring data accuracy.
Accurate data is crucial as any errors can lead to incorrect tax calculations and payments, potentially resulting in complications with the tax authorities.
Employers must also consider any changes in the employment status, like promotions or resignations, and employee benefits, when preparing EA Forms.
3. Enhance Employee Satisfaction
Timely submission of EA Forms significantly reduces tax-related stress for employees.
By providing the EA Forms early, employers demonstrate their commitment to employees’ well-being and compliance with tax obligations.
This can improve employee morale and foster trust in the employer, creating a more positive work environment.
4. Better Resource Management
Early submission of EA Forms allows both employers and employees to file taxes sooner, avoiding the last-minute rush typically associated with tax season.
This proactive approach reduces the added stress and time pressure on employees who need to compile receipts and complete their tax filings.
It also contributes to maintaining optimum work productivity, as employees are not bogged down by tax-related concerns and can focus on their regular duties.
Read More: Personal Loan Scam in Malaysia: How to Stay Safe
How to Ensure Efficient Preparations during Tax Season
1. Implement Payroll Software or Systems
Employers can streamline the payroll and documentation process by utilising a payroll software that alleviates tedious paperwork.
Some benefits of using a payroll software include the automation of payroll calculations, accurate tax deductions, and seamless integration with other financial systems for consolidated data management.
When selecting payroll software, employers should choose one that aligns with their budget and is suitable for their company’s size.
This ensures that the software meets their current needs and is scalable for future requirements.
2. Training and Awareness
Educating employees about tax policies and procedures through regular updates and training sessions is crucial to ensure everyone is well-informed.
Companies should promote a culture of continuous awareness to help employees stay updated with the latest tax benefits, claims, and exemptions.
This knowledge empowers them to manage their finances better and understand the impact of taxes on their income.
3. Seek Professional Help
For more complex tax situations or audit preparations, companies may benefit from hiring external experts or consulting firms.
These professionals can assist in mitigating risks and ensuring compliance with tax laws and regulations.
Additionally, the right tax professional can maximise the company’s deductions and benefits, while devising strategies to avoid pitfalls during tax season.
How Bluebricks Can Help Employers
By implementing the strategies mentioned, companies can significantly improve the efficiency and accuracy of their tax season preparations.
Bluebricks specialises in providing tailored financial solutions that align with your business’s tax strategies and overall financial planning.
Trusted by a multitude of clients, Bluebricks provides an extensive range of financial services to support your company’s short- and long-term goals, which include:
- Personal loan services
- SME loan services
- Mortgage loan services (for buying a new home, refinancing and cashback purposes)
- Collateral loan services
Customised Loan Consultancy Services
From business loans and business expansions to improving cash flow, we provide personalised guidance and advice for a loan option that meets your needs.
Our team will help you understand the application process and minimise risk by considering the following factors:
- The specific loan amount you require.
- The urgency with which the loan amount is needed.
- Whether you or your parents own a property that has been held for over ten years.
- Your income level.
- Your CTOS score (such as your credit score and credit history).
Submit EA Form – FAQs
We hope our guide can contribute to a smoother, more compliant, and less stressful tax process for employers and employees.
Here are some of the frequently asked questions (FAQs) related to EA Form submission.
Employers can submit EA Forms either in a physical format or electronically.
The most important factor is ensuring the form is accurate and securely delivered to each employee.
The EA Form includes details such as total income earned, deductions, benefits, and tax already paid. It also encompasses different salary components like bonuses, overtime pay, and allowances.
While technically possible, filing taxes without an EA Form is challenging as it contains critical information needed for an accurate tax return.
Employees should request their EA Form from their employer if they did not receive it.
If employees find any discrepancies in their EA Form, they should immediately contact their employer’s HR or payroll department for corrections.
It’s crucial to have accurate information for tax filing purposes.
