Are you waving goodbye to Malaysia for an extended period? Whether you’re a Malaysian citizen or a foreign resident, obtaining a tax clearance certificate (known as “Surat Penyelesaian Cukai” or SPC) is crucial before your departure. This document verifies that you have settled all outstanding tax liabilities with the Malaysian government, ensuring a smooth exit process.

This comprehensive guide delves deeper into the tax clearance process for Malaysians and foreigners departing Malaysia for more than three months. We’ll explore who needs tax clearance, the different types available, and the step-by-step procedures for obtaining it. Additionally, we’ll cover helpful tips and resources to make navigating tax clearance a breeze.

Why is Tax Clearance Important?

Obtaining tax clearance demonstrates your tax compliance with the Malaysian Inland Revenue Board (LHDN). Here’s why it’s important:

• Departure Approval: Airlines and immigration authorities may require an SPC before allowing you to leave the country.
• Final Salary and Benefits: Employers often withhold final salary payments and benefits until you present your tax clearance certificate.
• Re-entry to Malaysia: An SPC can simplify the process of re-entering Malaysia in the future.

Who Needs Tax Clearance?

The requirement for tax clearance applies to both Malaysians and foreign residents under the following circumstances:

• Departure Duration: Anyone, regardless of nationality, leaving Malaysia for more than three months needs tax clearance.
• Employment Status:
  • Malaysians: If you’re a Malaysian citizen employed in Malaysia and are resigning, retiring, or taking a long leave of absence exceeding three months, you need tax clearance.
  • Foreigners: Foreign residents with employment income in Malaysia also require tax clearance before departure, irrespective of their employment status change (resignation, termination, completion of contract, etc.).

Types of Tax Clearance in Malaysia

There are two primary types of tax clearance certificates issued by the LHDN:

1. Company Tax Clearance: Required for companies undergoing specific actions like liquidation, mergers, or applying for government licenses. This guide focuses on individual tax clearance for departing Malaysians and foreigners.
2. Employee Tax Clearance: This is the relevant type for individuals and is issued by your employer to confirm that your tax dues are settled before receiving your final salary or benefits.

How to Obtain Tax Clearance (For Malaysians and Foreigners Departing Malaysia):

The process for obtaining tax clearance is generally handled by your employer upon receiving notification of your resignation, retirement, or extended leave of absence. Here’s a breakdown of the steps involved:

1. Employer Initiation:

• Your employer will initiate the tax clearance process by gathering the necessary information from you, including your employment details and tax identification number.
• Depending on your situation, they will complete the appropriate form:
  • Form CP21: Used for Malaysians and foreigners departing Malaysia for a period exceeding three months.

2. Tax Record Verification:

• Your employer will submit the completed form and any supporting documents to the LHDN.
• The LHDN will then verify your tax record to identify any outstanding tax liabilities, such as income tax, penalty payments, or unpaid levies.

3. Settling Outstanding Taxes (if any):

• If the LHDN identifies any outstanding taxes, you will be notified and required to settle them before proceeding.
• This may involve making payments to the LHDN directly or through your employer.

4. Issuing the Tax Clearance Certificate:

• Once all tax obligations are fulfilled, the LHDN will issue the tax clearance certificate to your employer.
• Your employer will then receive and provide you with your original SPC.

Important Considerations:

• Record Keeping: Maintaining accurate and detailed records of your income and tax payments throughout your employment in Malaysia helps ensure a smooth clearance process.
• Processing Time: Allow sufficient time for processing, especially if you have a complex tax situation. The LHDN may request additional information or documents during verification.
• Penalties for Non-Compliance: Failing to obtain tax clearance can result in delays or even refusal to depart the country. You may also face penalties for outstanding taxes.

Additional Tips for a Smooth Tax Clearance Process:

• Communicate Early: Inform your employer about your departure well in advance to allow them ample time to initiate the tax clearance process.
• Gather Supporting Documents: While not always required, consider gathering documents like salary slips, tax payment receipts, and proof of income sources to expedite verification.
• Consult Us for Professional Help : If you have a complex tax situation or require assistance navigating the process, consulting us for a professional tax advice is recommended.