Every employer in Malaysia is responsible for managing employee income tax deductions and reporting to LHDN (Inland Revenue Board of Malaysia).
This includes registering as an employer, deducting PCB/MTD, issuing EA Forms, and submitting Form E annually.

Failure to comply not only leads to financial penalties but can also damage your company’s credibility and employee trust.
This article breaks down everything Malaysian employers need to know about income tax reporting, required forms, deadlines, and best practices for staying compliant.

Why Income Tax Reporting Matters for Employers

Income tax reporting is not just a formality — it’s a legal obligation under the Income Tax Act 1967.
Employers play a vital role in collecting and remitting taxes on behalf of their employees.

Ignoring or mishandling these responsibilities can lead to serious consequences:

• Financial Penalties — LHDN may impose fines ranging from hundreds to thousands of ringgit.

• Audits & Investigations — Inaccurate or late submissions can trigger audits.

• Reputation Risks — Non-compliance undermines employee trust and damages your employer brand.

To help you stay compliant, let’s go through your key duties, the required forms, and important deadlines step by step.

Employer’s Income Tax Responsibilities in Malaysia

Under the Income Tax Act, all employers are required to:

• Register with LHDN and obtain an Employer Number (E Number).

• Deduct Monthly Tax (PCB/MTD) from employees’ salaries based on LHDN’s schedule.

• Record all taxable benefits and allowances, such as bonuses, commissions, and benefits-in-kind.

• Remit PCB/MTD payments to LHDN by the 15th of the following month.

• Issue EA Forms to employees and submit Form E annually to LHDN.

• Collect TP3 Forms from new hires who have earned previous income in the same year.

• Maintain payroll and tax records for at least seven (7) years for audit purposes.

💡 Tip: Pandahrms simplifies this entire process by automatically calculating PCB, generating EA & E forms, and securely storing all tax records — ensuring you never miss a compliance deadline.

Mandatory Forms Employers Must Prepare & Submit

Income Tax Reporting Timeline & Deadlines

Once you hire employees, you become legally responsible for their income tax deductions and submissions.
Here’s a quick overview of the annual reporting timeline for Malaysian employers:

Step-by-Step Guide: How Employers Submit Income Tax to LHDN

Follow these steps each year to ensure full compliance with LHDN requirements:

1️⃣ Register for an Employer Number (E Number) before hiring.
2️⃣ Calculate and deduct PCB/MTD from employee salaries each month.
3️⃣ Remit PCB/MTD payments to LHDN before the 15th of the following month.
4️⃣ Track taxable allowances and benefits, including car, housing, and meal allowances.
5️⃣ Collect TP3/TP2 forms where applicable.
6️⃣ Prepare and issue EA forms by the end of February.
7️⃣ Submit Form E to LHDN by 31 March.

💡 With Pandahrms Payroll Module, employers can automate all these steps — from calculating PCB to generating EA and E forms instantly — saving time and minimizing human error.

Best Practices for Smooth Income Tax Reporting

To make your tax reporting more efficient and error-free, here are some recommended best practices:

✅ Use Payroll Software with Built-In Tax Compliance
Pandahrms automatically calculates PCB and generates reports that match LHDN’s latest requirements.

✅ Automate Reminders for Key Deadlines
Set system alerts for the 15th of every month, end of February, and 31 March to stay on schedule.

✅ Cross-Check Payroll with Finance Records
Ensure monthly deductions match the amounts actually paid to LHDN.

✅ Run Quarterly Internal Audits
Regular reviews help identify discrepancies before they lead to penalties.

✅ Train HR and Payroll Teams
Stay updated on LHDN’s latest rules and rate changes to ensure accuracy.

✅ Communicate Clearly with Employees
Help employees understand their EA, TP3, and TP2 forms to prevent confusion during personal tax filing.

FAQ: Employer Income Tax Reporting in Malaysia

Q1: What forms must employers submit for income tax reporting?
Employers must submit monthly PCB/MTD deductions, issue EA Forms, and file Form E annually.

Q2: What is the deadline for submitting Form E?
Form E must be submitted by 31 March of the following year.

Q3: Are employers responsible for filing employees’ personal tax returns?
No. Employers only deduct and report taxes. Employees must file their own returns with LHDN.

Q4: How do employers calculate PCB for employees?
PCB/MTD is calculated using LHDN’s monthly tax deduction schedule, factoring in salary, benefits, and reliefs. Pandahrms automates this accurately.

Q5: What happens if an employer fails to issue EA Forms?
Employees may be unable to file their tax returns on time, and the employer could face fines or penalties.

Q6: Do foreign employees require income tax reporting?
Yes. If they qualify as tax residents (stay in Malaysia 182 days or more per year), employers must deduct PCB/MTD and issue EA Forms.
Non-residents are taxed at a flat rate.

Final Thoughts

Income tax reporting is a year-round responsibility that requires precision, timeliness, and good record-keeping.
With automated tools like Pandahrms, employers can handle PCB deductions, EA forms, and Form E submissions efficiently — ensuring 100% compliance with LHDN and avoiding unnecessary penalties.