Statutory deadline: 31 March 2026 | Applies to: All employers in Malaysia
Filing season started and the same questions are coming in. The biggest one this year: do foreign workers need to go into Form E, and do I need to deduct PCB?
Both answers are yes. Here is the full picture, plus five other mistakes we see employers make every year.
Mistake 1: Leaving Foreign Workers Out of Form E and CP8D
Under S83(1) ITA 1967, every employer must file a Form E return for every employee. The law does not distinguish by nationality. Foreign workers — regardless of work permit type — must be included in both the Form E and the CP8D.
PCB must also be deducted. The correct rate depends on the worker's tax residency status for that calendar year:
| Tax Residency Status | PCB Rate |
|---|---|
| Non-resident (fewer than 182 days in Malaysia) | 30% flat on gross income. No personal reliefs. |
| Tax resident (182 days or more in Malaysia) | Progressive rates — same as Malaysian employees |
The employer is responsible for determining which rate applies. One common point of confusion: the work permit levy paid by the employer is not employment income and is not subject to PCB. However, wages, allowances, and other payments made to the foreign worker are.
If you are unsure how to classify your foreign workers, get this sorted before filing.
Mistake 2: Not Reporting All Workers (The Deemed Employer Rule)
Many employers only think about workers on their formal payroll. The law goes further.
Under S83(6) ITA 1967, any person who benefits from a service provided by another person is deemed to be an employer — even without a formal employment contract and even if a third party handles the payment. This means contract workers, part-timers, and service providers engaged directly must all be captured in your Form E.
Mistake 3: Incomplete Income Disclosure in Form EA
Form EA must include all components of employment income — not just the monthly salary. Commonly missed items include:
- Annual bonuses
- Sales commissions
- Director's fees
- Allowances and perquisites
Under-reporting in Form EA creates a discrepancy between what the employer files and what the employee declares. This is picked up during LHDN's data matching process and can result in penalties for both parties.
Mistake 4: Wrong BIK and VLA Classification
The Value of Benefits-in-Kind (BIK) and the Value of Living Accommodation (VLA) must be calculated and classified following LHDN's prescribed method. Getting either wrong — whether under or over — affects the employee's taxable income figure and is one of the more common triggers for an employer audit.
If your company provides staff housing, company cars, or other non-cash benefits, verify the classification before filing.
Mistake 5: Thinking Dormant Companies Do Not Need to File
This one comes up every year. A company that was dormant — no operations, no revenue, no employees on payroll — is still required to file Form E. There is no dormancy exemption. If the company is registered, Form E must be filed.
Mistake 6: Submitting Form E Without the CP8D
LHDN treats a Form E without the accompanying CP8D as an incomplete submission. An incomplete submission is the same as no submission — and penalties under S112(1) ITA 1967 apply from the statutory deadline, not from when LHDN notifies you.
Always confirm the CP8D is attached before clicking submit.
Before You Submit: A Quick Checklist
☐ Foreign workers included in Form E and CP8D
☐ Correct PCB rate applied (30% flat for non-residents; progressive for tax residents)
☐ All income components captured in Form EA
☐ BIK and VLA correctly classified
☐ Form E filed even for dormant companies
☐ CP8D attached to Form E
A Note on the Deadline
The statutory deadline for Form E is 31 March 2026. LHDN has in recent years granted a one-month administrative grace period for e-Filing, making the effective date 30 April. This concession is not guaranteed year to year and is not a statutory right. Target 31 March.
Need help before you file?
Our team at KS Chia & Associates reviews employer filings and CP8D before submission. Reach out if you need a second check.
WhatsApp: 011-2366 5233
#FormE #CP8D #ForeignWorker #PCB #LHDN #MalaysiaTax #EmployerAlert #TaxCompliance #KSChiaAssociates #TaxFiling2026
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