(This article is also available in Chinese 华语)
The Importance of Form EA
What is the purpose of Form EA? My employees are constantly asking me about it.
Form EA, also known as Borang EA, is a yearly remuneration statement required for income tax filing and serves as a concise summary of an employee’s annual earnings received from their employer.
Employers must send Form EA to everyone on or before the last day of February of each year (as example for year 2024, on or before 29/2/2024)
Read More: Form EA Deadline & 5 Other Key Tax Deadlines for Malaysian SMEs
Pro Tip: Employers do not need to submit Form EA on behalf of their employees to LHDN. It’s a common misconception that Form EA needs to be submitted to LHDN together with Form E.
My employees already receive their salary slips every month. Why do I still need to issue Form EA to them again? It seems like a waste of paper.
The Form EA is distributed to employees for the purposes of individual tax filing. As stated in the Income Tax Act 1967, it’s the employer’s responsibility to ensure Form EA is prepared for every employee. You can consider digital methods such as sending the form as a softcopy to your employees.
How to Prepare Form EA
Where can I get Form EA?
You can download it directly from LHDN’s website.
The standard EA form has 6 sections of information that needs to filled in, namely:
A: Particular of employee
B: Employee income, benefits and living accommodation
C: Pension and others
D: Total deductions on Income Tax & TP1 relief
E: Contributions paid by employee to approved provident/ pension fund and SOCSO
F: Total tax exempted allowances/ perquisites/ gifts/ benefits
What basic information is required to prepare Form EA?
Personal details of each employee, such as:
- Name
- IC number / Passport number
- Company position
- Date of employment and resignation (if applicable)
- Marital status
- Number of children (if applicable)
- EPF number
- SOCSO number
- Income tax registration number
Is there anything else that needs to be filled out?
You’ll also need to fill in PCB, EPF, SOCSO and EIS contribution amounts that are withheld from the employee’s salary every month.
My employee earns a significant portion of his income from commissions and / or bonuses. He has expressed that he doesn’t want to pay such a high income tax amount. Can his Form EA only state his basic salary?
Absolutely not. Form EA must be filled with all salaries received by the employee in discussion, including wages, overtime pay, allowances, bonuses, commissions, monetary benefits, etc.
Pro Tip: The company bears the responsibility of reporting how much it pays its employees to LHDN. LHDN needs to be able to reconcile the amounts stated on Form EA with the salaries reported in Form E, as well as with the company accounts. Therefore, it’s really not worth your time, effort or reputation to cook the books as LHDN has ways of finding you out.
Other Benefits and Fees- How to Fill in Form EA
Where does Benefits-in-Kind (BIK) come from? Is it mandatory to report BIK?
Benefits-in-kind are material benefits provided to an employee by the company. Such benefits can range from allowances, discounts on certain personal care goods or services, selective leaves or even childcare and usually cannot be converted into cash.
For example, an employer provides a company vehicle for employee A’s day to day use. This provision will be included as a benefits-in-kind in employee A’s Form EA. Do reach out to your tax agent for assistance in calculating various BIKs and how it fits into employee PCBs.
What about perquisites?
Perks or benefits given by the company to employees, which can be converted into cash by said employees, are considered perquisites and must also be accounted for in Form EA.
Supposing that I pay my employees their 2023 bonuses in 2024. Which year should I report it for?
It should be reported in 2024 as the employees received this income in 2024.
Due to the pandemic, I was only able to pay my employees their 2019 bonuses in 2021. How should it be reported?
It should be reported in 2021. As a rule of thumb, all income should be reported in the year in which it is received, except for director’s fees.
Assuming that the company has not paid its directors their director fees in 2020 due to the pandemic. Does this need to be reported?
According to Sec 29(4) of the Income Tax Act, directors preside control over the company. Therefore, even though they have forgone their director fees, they’re still required to pay the corresponding PCB and report before 15/1/2021 for the year of assessment 2020.
Ensure that Form EA is Prepared for All Employees
Do I need to prepare Form EA for directors?
Yes, directors are considered employees of the company.
Do I need to prepare Form EA for part-timers?
Yes, part-timers are also employees of the company.
Do foreign workers need Form EA?
It depends on the nature of their employment. Full time foreign workers are counted as employees of the company and you’ll need to prepare Form EA for them just like any other regular employee.
For foreign workers who are contracted and not under employment (contract for income basis), you should prepare and issue Form CP58 instead.
At the end of the day, employers should do their part in understanding the relevant aspects of Form EA to avoid misleading their employees into under-declaring taxes. In this busy tax season, you can eliminate mistakes and additional stress by outsourcing your tax filing to-dos to Bispoint Group’s team of tax experts with a simple click or call.