Form EA

Form EA | Bestar

Malaysian Form EA Explained

Form EA in Malaysia, officially known as the "Statement of Remuneration from Employment" (or Borang EA/CP8A), is a crucial tax document that employers are required to prepare for each of their employees.

Here's a breakdown of what it is and its key aspects:

What is Form EA?

• Summary of Earnings: It provides a comprehensive summary of an employee's total earnings, allowances, benefits-in-kind (BIK), perquisites, and any deductions (like EPF, SOCSO, EIS, and Monthly Tax Deductions/PCB) received from their employer during the previous calendar year (Year of Assessment).

• For Employee's Tax Filing: The primary purpose of Form EA is to enable employees to accurately file their personal income tax returns (Form BE for individuals with employment income only, or Form B for individuals with business income). It helps them determine their income tax bracket and declare their earnings to the Inland Revenue Board of Malaysia (LHDN).

• Mandatory: Employers are legally mandated to prepare Form EA for all employees who have worked for more than seven days and received any form of payment, regardless of their employment status (full-time, part-time, fixed-term, interns, directors, foreign employees, and even resigned employees).

What is included in Form EA?

Form EA typically includes:

• Gross salary, wages, and similar remuneration

• Overtime pay

• Commissions

• Bonuses and gratuities

• Allowances and perquisites (e.g., travel allowance, meal allowance, childcare allowance, petrol allowance, mobile phone benefits, etc.)

• Benefits-in-kind (BIK) such as company car, health insurance, or housing.

• Value of Living Accommodation (VOLA)

• Employer's contributions to private pensions

• Compensation for loss of employment

• Employee's contributions to EPF, SOCSO, and EIS

• Monthly Tax Deductions (PCB/MTD) withheld from the employee's salary.

• Certain tax-exempt allowances/benefits (even if exempt, they generally need to be declared).

Who prepares and receives Form EA?

• Prepared by Employer: The employer is responsible for preparing Form EA for all eligible employees.

• Issued to Employee: The employer must provide the completed Form EA to each employee. It is NOT submitted by the employer to LHDN, but it is essential for the employee's tax filing.

Deadline for Form EA:

• Employers must issue Form EA to their employees by the last day of February of the following year. For example, for the Year of Assessment 2024 (income earned in 2024), the Form EA must be provided to employees by February 28, 2025.

Consequences of Non-Compliance:

Failure by employers to prepare and provide Form EA to their employees by the deadline can result in penalties, including fines (up to RM20,000) or imprisonment.

Relationship with Form E:

It's important to differentiate Form EA from Form E.

• Form EA: For employees, summarizing their individual earnings for tax filing.

• Form E: For employers, declaring the total number of employees, their aggregate remuneration, and total tax deductions to LHDN. Form E must be submitted to LHDN by March 31st (or April 30th for e-filing) of the following year.

In essence, Form EA is a vital document for employees to fulfill their personal income tax obligations in Malaysia. Employers must ensure its accurate and timely preparation and distribution.

Fees

There are generally no direct fees charged by the Inland Revenue Board of Malaysia (LHDN) for generating or obtaining the official Form EA template. Employers can download the template from the LHDN website for free.

However, there are "fees" that can be incurred in relation to Form EA in the following contexts:

1. Payroll Software/Services:

   
   

   • If you engage Bestar to handle your company's payroll and tax compliance, we will charge professional fees for our services, which would include the preparation of Form EA for your employees and Form E for the company. Bestar charges a per-employee fee for EA form preparation (e.g., RM15 - RM50 per form).

     
     

2. Penalties for Non-Compliance (for Employers):

   
   

   • This is where significant "fees" or penalties can arise. Employers who fail to prepare and provide Form EA to their employees by the deadline (February 28th) of the following year can face penalties from LHDN. These penalties can include:

     
     

     • Fines: Ranging from RM200 to RM20,000.

     • Imprisonment: Up to six months, or both.

In summary:

• For employees: There is no fee to receive your Form EA from your employer.

  
  

• For employers: There is no fee to download the Form EA template from LHDN. However, you will incur costs if you engage external services for payroll and tax compliance. Crucially, failing to issue Form EA on time will result in significant penalties.

How Bestar can Help

Bestar plays a critical role in helping businesses and individuals in Malaysia navigate the complexities of tax compliance, especially concerning Form EA and Form E. Our expertise can significantly reduce the burden on employers and ensure adherence to LHDN regulations.

Here's how we can help:

1. Payroll Management and Form EA/E Preparation:

• Accurate Calculation of Remuneration: We ensure all components of an employee's remuneration (salary, allowances, bonuses, commissions, benefits-in-kind, perquisites, etc.) are correctly identified and calculated for tax purposes. This is crucial for accurate Form EA generation.

  
  

• Benefits-in-Kind (BIK) and Value of Living Accommodation (VOLA) Valuation: These can be complex to calculate. Bestar has the knowledge and tools to accurately assess the taxable value of BIK (e.g., company cars, medical benefits, club memberships) and VOLA (rent-free housing) as per LHDN guidelines. This is a common area for errors if not handled by experts.

  
  

• Statutory Contribution Calculation and Reconciliation: We ensure correct calculation and reconciliation of EPF, SOCSO, EIS, and Monthly Tax Deductions (PCB/MTD) for each employee, as these figures are essential for Form EA.

  
  

• Automated Form Generation: Bestar uses sophisticated payroll software that automates the generation of Form EA for individual employees and the aggregate Form E for the employer, minimizing manual errors and ensuring the correct format.

  
  

• Timely Issuance and Submission: We help employers meet the strict deadlines for issuing Form EA to employees (February 28th) and submitting Form E to LHDN (March 31st for manual, April 30th for e-filing). Missing these deadlines can result in significant penalties.

2. Ensuring Compliance and Avoiding Penalties:

• Up-to-Date Knowledge: Tax laws and regulations in Malaysia can change frequently. Bestar stays abreast of the latest LHDN updates, ensuring that all calculations and reporting on Form EA and Form E comply with current requirements.

  
  

• Risk Mitigation: We identify potential areas of non-compliance and advise on corrective actions, thereby minimizing the risk of fines, penalties, or tax audits from LHDN.

  
  

• Advisory on Taxable vs. Non-Taxable Items: We can provide clear guidance on what constitutes taxable income, deductible expenses, and tax-exempt items, which can be confusing for employers.

3. Streamlining Processes and Efficiency:

• Reduced Administrative Burden: Outsourcing payroll and Form EA/E preparation frees up internal HR and finance staff from time-consuming administrative tasks, allowing them to focus on core business activities.

  
  

• Error Reduction: Bestar has robust internal controls and processes to ensure accuracy, reducing the likelihood of calculation errors or omissions that could lead to discrepancies or LHDN queries.

  
  

• Data Security: Bestar employs secure systems to handle sensitive payroll and employee data, ensuring confidentiality and compliance with data protection regulations.

4. Handling LHDN Queries and Audits:

• Liaison with LHDN: In the event of LHDN queries, requests for clarification, or even an audit, accounting firms and tax agents can act as a liaison, communicating with the tax authorities on behalf of the employer.

  
  

• Documentation and Support: We can help prepare and provide the necessary supporting documentation and explanations to LHDN, ensuring that all records are in order.

5. Tax Planning and Advisory:

• Beyond mere compliance, Bestar offers tax planning advice. While less direct for Form EA, this can involve optimizing remuneration packages to be more tax-efficient for employees and employers within legal frameworks.

Who benefits from their services?

• Small and Medium-sized Enterprises (SMEs): Often lack dedicated in-house payroll or tax departments.

• Startups: Need to establish compliant payroll processes from the beginning.

• Companies with Complex Remuneration Structures: Those offering various allowances, benefits-in-kind, or international assignments.

• Businesses focused on growth: Want to offload administrative tasks to focus on strategic development.

By leveraging the expertise of Bestar, businesses can ensure their Form EA and Form E obligations are met accurately and on time, giving them peace of mind and protecting them from potential penalties.

Request for Proposal