Any Employee Leaving The Country? Here Is What Your Company Must Do About Their Tax

An employer's responsibilities do not end once an employee resigns or prepares to leave Malaysia for an extended period. This obligation is not limited to foreign staff completing an overseas assignment. It applies equally to any employee, Malaysian or foreign, who is chargeable to tax and who intends to leave the country for more than three months, whether for relocation, an extended posting abroad, or any other reason. Malaysian law places specific and time-bound obligations on the employer in every such case, to ensure the employee's tax affairs are properly closed out before departure.

The employer must notify the tax authority of the employee's departure using the appropriate form, and this notification must be submitted electronically not less than thirty days before the employee is expected to leave the country. This requirement is triggered by the departure itself and the employee's tax-chargeable status, not by the employee's nationality. This early notice gives the tax authority time to assess the employee's final tax position before they are no longer easily reachable.

Once this notification is submitted, the employer must withhold any portion of money still owed to the employee, whether final salary, leave pay, or other amounts due. This withheld money cannot be released to the employee, even partially, until either a tax clearance letter is issued by the tax authority, or ninety days pass from the date the notification was submitted, whichever comes first.

Where the employee's tax, or a portion of it, is being borne by the employer under an existing arrangement, the same final computation must be completed before departure, so that the correct amount can be remitted directly to the tax authority through the clearance process. The employer remains responsible for ensuring the tax due is settled in full, regardless of whether the employer or the employee is the one financially bearing the cost.

Failure to comply with these notification and withholding requirements is an offence, and beyond the risk of prosecution, an employer who fails to withhold funds as required can become personally liable to pay the full amount of tax owed by the departing employee, recoverable by the government as a civil debt.

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