PERSONAL TAX CLEARANCE LETTER

What is Tax Clearance Letter?

The tax clearance letter (TCL) is a letter issued by the IRB to notify the employer of a deceased/ retiring/ resigning employee’s tax liability to enable the employer to make the final payment of salary/ compensation/ gratuity to the employee.

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Employer is required to submit an application to the Inland Revenue Board (IRB) for tax clearance letter (TCL) in relation to the termination of employment, retirement, death or departure from Malaysia of an employee.

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When to make the application?

Application for TCL is required in these situations:

• Employee resigns from employment
• Employee retires from employment
• Death of an employee
• Employee is leaving Malaysia for a period exceeding 3 months

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Forms to notify IRB 

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Exemption for Tax Clearance Application

An employer is not required to give notice of cessation of the employment in the following instances:-

1. Where the income of an employee is subject to monthly tax deduction (MTD); or
2. Where the employee’s monthly remuneration is below the minimum amount of income that is subject to MTD

and provided it is known to the employer that the employee will continue working or not retiring from any employment in Malaysia.

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Consequence of Non-compliance and Penalty

Employer who fails to give the notice on the employee who is about to cease employment/ retire/ leave the country shall be liable to a fine of not less than RM2,000 and not more than RM20,000 or to imprisonment for a term not exceeding 6 months or to both. Furthermore, the employer will be liable for the employee’s outstanding tax obligations.

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