Employer's Compliance Guide: Your 2026 Checklist for Malaysian Tax Rules

Employer's Compliance Guide: Start 2026 Right

As we step into 2026, it's the perfect time for employers to review their compliance checklist. This guide serves as a friendly reminder of your key obligations to the Inland Revenue Board (LHDN), including an important clarification on when to file Form CP22A for departing staff.

1. For New Hires in 2026

1.Stamp the Employment Contract: All employment contracts must be stamped with a RM10 duty within 30 days of signing.

2.Submit Form e-CP22: Notify LHDN of new hires within 30 days via the mandatory e-CP22 portal, especially if the employee is likely to be taxable.

2. For Departing Employees: When is Form CP22A Required?

This is a common point of confusion. You are NOT required to file Form CP22A for every resigning employee. The key is whether the employee's income has been consistently reported via Monthly Tax Deductions (MTD/PCB).

You are generally EXEMPT from filing Form CP22A if:

• The employee's income has been subject to MTD/PCB, AND

• They are not receiving any lump-sum payments like gratuity or compensation for loss of employment.

You MUST file Form CP22A (via e-SPC) if:

• The employee's monthly income was below the MTD threshold (and thus no MTD was ever deducted).

• The employee is receiving a final payment of compensation or gratuity upon termination.

•T he employee is a foreign worker leaving Malaysia (use Form CP21).

When in doubt, it is always safest to file. If you do file, you must withhold all final payments until you receive the Tax Clearance Certificate from LHDN.

3. Annual & Monthly Obligations

• Form E (Annual Return): The statutory deadline is 31 March (or 30 April for e-filing).

• Form EA (Staff Remuneration): Provide to all employees by the last day of February.

• MTD/PCB (Monthly Deduction): Remit by the 15th of the following month.

A Partner in Compliance

Understanding these nuances is key to efficient compliance. We're here to help you navigate these requirements with confidence.

e-Lanjutan Masa: A Complete Guide to LHDN's New Tax Filing Extension System for Malaysian Companies

Introduction

The Lembaga Hasil Dalam Negeri Malaysia (LHDN) has released a new guideline called Garis Panduan Operasi Bil. 4 Tahun 2025, which introduces the e-Lanjutan Masa system. This online facility allows eligible companies to apply for an extension of time (EOT) for submitting their tax returns.

For many Malaysian SME owners, this is welcome news. But there's a catch that many don't know about: your company must first have an SSM extension before LHDN will approve your application.

In this article, we explain the new system, why companies need extensions, and the proper procedure to follow.

What is e-Lanjutan Masa?

e-Lanjutan Masa is LHDN's new online application system for requesting more time to submit your company's tax return (Borang Nyata). The system is available through the MyTax portal at mytax.hasil.gov.my.

Who can apply?

• Companies (Sdn Bhd, Berhad)

• Limited Liability Partnerships (LLP)

• Cooperatives

• Trust bodies

• Petroleum operations

Who cannot apply?

Individual taxpayers (sole proprietors, partnerships, employees) are not eligible for this system.

The Critical Requirement: SSM Extension First

Here's what many business owners miss: one of the main conditions for LHDN to approve your e-Lanjutan Masa application is that you already have an EOT from SSM.

This means if your accounts are delayed and you haven't applied for SSM extension, you won't qualify for LHDN extension either. You'll face penalties from both SSM and LHDN.

Why Do Malaysian SMEs Need Extension of Time?

Based on our experience working with hundreds of SME clients, here are the most common reasons companies can't meet their filing deadlines:

1. Internal Accounting Problems

Many SMEs struggle with basic bookkeeping. Common issues include:

• Missing invoices and receipts

• Cash sales not properly recorded

• Poor filing of supporting documents

• No bank reconciliation done regularly

These problems mean the trial balance isn't ready, and the audit cannot even start.

2. Staffing Challenges

Small businesses often have:

• Junior or inexperienced accounts clerks

• High staff turnover in the accounts department

• Admin staff handling accounts as a side duty

• No proper handover when staff leave

This leads to errors, rework, and delays.

3. No Proper Closing Process

Many SMEs don't have a month-end or year-end closing checklist. There's no cut-off review, no stock count, no reconciliation. The accounts only get "cleaned up" once a year when the auditor starts chasing.

4. Last-Minute Culture

Some business owners send documents to their auditors just days before the deadline, expecting the audit firm to "rush for them." This is unrealistic. A proper audit takes time — preparing working papers, drafting reports, review process, and converting to XBRL format for SSM submission.

5. Low Awareness of Deadlines

For many SME owners, audit and tax filing are low priority compared to sales, cash flow, and daily operations. They don't realise the penalties for late submission can be significant.

6. Management Delays

Sometimes the accounts are ready, but management hasn't made certain decisions needed to finalise them:

• Impairment of assets

• Provisions for doubtful debts

• Director remuneration

• Dividend declarations

• Related party transaction disclosures

7. Shareholder or Director Disputes

Family businesses or companies with multiple shareholders sometimes face internal conflicts. Partners may be exiting, family members may be in dispute, or directors may refuse to sign the financial statements. This causes paralysis and delays.

8. Unexpected Disasters

Sometimes things happen that are beyond anyone's control:

• Fire or flood damaging office and records

• Theft of computers or documents

• These situations require reconstruction of records, which takes considerable time

9. Cyber Incidents

In today's digital world, cyber attacks are a real risk:

• Ransomware encrypting all company data

• Server failures with no proper backup

•Loss of cloud accounting data

Recovering from these incidents and reconstructing ledgers can take months.

10. Change in Accounting Standards

Companies adopting MPERS or MFRS for the first time, or dealing with new accounting standards, may face delays in making policy decisions and restating comparative figures.

The Proper Procedure: Step by Step

If your company's accounts won't be ready on time, here's what you should do:

Step 1: Recognise the problem early

Don't wait until the last week. If you know your accounts will be delayed, start planning at least 2-3 months before the deadline.

Step 2: Apply for SSM extension

Submit your EOT application to SSM through their online system. You'll need to provide a valid reason for the extension.

Step 3: Get SSM approval

Once SSM approves your extension, keep the approval letter and the Publish Report screenshot.

Step 4: Apply for LHDN extension via e-Lanjutan Masa

Log into MyTax, go to e-Lanjutan Masa, and submit your application. Upload your SSM approval documents.

Step 5: Meet the new deadline

Once approved, make sure you submit your tax return by the extended deadline. The extension doesn't mean you can delay forever — there's still a new deadline to meet.

Important Timelines to Remember

•Applications must be made at least 14 days before your filing deadline

•Applications made less than 14 days before deadline will be automatically rejected

•The earliest you can apply is 30 days before the deadline

What Happens If You Don't Follow This Process?

If you miss the deadline without proper EOT approval:

•SSM penalty: Late lodgement fees

•LHDN penalty: Under Section 112(3) of the Income Tax Act 1967

•Late payment penalty: Under Section 103(3) if tax is paid late

These penalties add up and can be substantial for companies with large tax liabilities.

Our Advice to SME Owners

Plan ahead. Work with your auditor early in the year, not just when the deadline is approaching.

Fix your internal processes. Invest in proper bookkeeping, train your staff, and implement month-end closing procedures.

Know your deadlines. Mark them in your calendar and work backwards to set internal milestones.

Communicate with your auditor. If you're facing delays, tell your auditor early so they can advise you on the EOT process.

Don't assume your auditor can rush. A proper audit takes time. Sending documents at the last minute puts everyone under pressure and increases the risk of errors.

Need Help?

If you have questions about the new e-Lanjutan Masa system, SSM extensions, or your company's tax filing obligations, we're here to help.

KS Chia & Associates

Chartered Accountants (AF001828)

📱 WhatsApp us: 011 2366 5233

We've been helping Malaysian SMEs with their audit and tax compliance for years. Let us guide you through the process.