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.
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.
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
Forms to notify IRB
Exemption for Tax Clearance Application
employer is not required to give notice of cessation of the employment in the
following instances: -
a. Where the income of an employee is subject to monthly tax deduction (MTD); or
b. 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.
TCL application process
Refer to (1) How to Apply in the picture above, form prescribed under section 152 of the ITA 1967:
** Due to the COVID-19 pandemic, IRB has agreed to provide
flexibility to employers to use and submit paper forms or other forms with
format/ version not as prescribed under section 152 of the ITA 1967 via the
following method until 31 December 2021:
❖ Manual Submission to IRB Branches
❖ By Post
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.
1.Tax Clearance Letter
2. KELONGGARAN PENGGUNAAN BORANG KERTAS DAN KAEDAH PENGEMUKAAN BORANG CP21, CP22, CP22A DAN CP22B