(TAX UPDATE) New IRBM Rules on Tax Clearance Letter (TCL) for Individuals … What Employers Must Know

(TAX UPDATE) New IRBM Rules on Tax Clearance Letter (TCL) for Individuals … What Employers Must Know

Introduction

The Inland Revenue Board of Malaysia (IRBM) has issued updated operational guidelines on tax clearance letters (TCL) for individuals.
This latest version, released on 1 November 2025, replaces the earlier guidelines dated 1 April 2024.

Many employers face delays, penalties, or tax risks simply because they are unsure when to submit CP21, CP22, CP22A or CP22B.
This update brings some relief, especially for employers with foreign workers.

Key Updates at a Glance

1. No more CP22A / CP22B for certain foreign employees

Employers are exempted from filing CP22A or CP22B when a non-Malaysian employee ceases employment, provided that:

  • The employee does not receive any gratuity or compensation on exit, and

  • The employee continues employment in Malaysia (for example, transfers job or changes employer)

If both conditions are fulfilled, the employer does not need to notify IRBM under Section 83(3) Income Tax Act 1967.

2. Amended or additional TCL applications must use e-SPC

  • Any amendment or additional TCL request must now be submitted via e-SPC on MyTax Portal

  • However, cancellation of TCL is still done manually at the IRBM office handling the employee’s tax file

This means employers must manage two different procedures depending on the action:
digital for amendments, physical for cancellation.

3. New document added: “Declaration of Resident Status”

For CP21 applications (when an employee leaves Malaysia), a new supporting document is required:

  • Declaration of resident status

This helps IRBM determine if the employee is resident or non-resident for tax purposes, which affects final tax calculation.

What This Means for SMEs

  • Less paperwork when foreign employees resign but continue working in Malaysia

  • More digital submissions — employers and HR teams should be ready to use the MyTax Portal for e-SPC

  • More accurate tax assessment for employees leaving Malaysia, especially expatriates and project-based workers

  • Risk of non-compliance remains if companies fail to check whether the employee receives gratuity or compensation before skipping CP22A/CP22B

For SMEs with frequent staff turnover, foreign talent, or expatriate executives, these rules are important to avoid penalties and tax disputes.

KTP’s View

This is a positive move.
IRBM is clearly pushing employers toward online tax processes and reducing unnecessary filings.

However, many HR and payroll teams may still be unaware of the conditions.
Skipping CP22A/CP22B without confirming compensation or residency status could expose the company to penalties under the Income Tax Act.

In short … simpler, but not risk-free.

Call to Action

If your company hires foreign staff, expatriates or project workers, speak to us before processing resignations or transfers.

KTP can assist with:

  • CP21, CP22A, CP22B compliance

  • e-SPC online submissions

  • Salary, gratuity and compensation tax treatment

  • Final payroll tax computation

Contact our tax team at www.ktp.com.my for guidance before your next employee exit.

Better to do it right the first time and avoid IRBM issues later.

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