What is EA Form?
An EA Form, or Borang EA, is an annual statement of remuneration provided to employees, playing a crucial role in their income tax filing process.
The purpose of EA Form is to enable employees to file their own taxes properly and declare their earnings to LHDN. That way, it can be determined which tax bracket they fall under.
It is mandatory for the employer to prepare EA Form for every employee – regardless of full-time, part-time, or fixed term status, by the end of February every year. As long as the employee has worked for more than seven days, and has received payment for their work, EA Form must be issued to the employee.
The following categories of employment earnings need to be included in EA Form:
- Gross salary
- Overtime pay
- Commission
- Bonus or other gratuities
- Allowances/perquisites (e.g. travel allowance, meal allowance)
- Benefits-in-kind (e.g. health insurance, company car and driver)
- Value of Living Accommodation (VOLA)
- Contributions to private pension (by employer)
- Compensation for loss of employment
While employers are not required to submit the EA Form to Malaysia’s Inland Revenue Board (LHDN), they must provide it to their employees for accurate tax filing and assessment. Failure to prepare EA Form may result in a fine of up to RM20,000, imprisonment for a term not exceeding six months, or both.
The deadline for providing EA Form for the year ending 31 December 2024 is 28 February 2025. Even if an employee resigns before the end of the year, they must still receive their EA Form for any income earned in 2024.
Why Companies Should Submit EA Form Early in Malaysia?
1. Avoid Penalties and Legal Consequences
Under Section 83(1A) of the Income Tax Act 1967, all Malaysian employers are mandated to prepare and submit EA Form to their employees no later than the last day of February.
If employers fail to prepare and render the EA Form by the deadline, they will incur fines ranging from RM200 to RM20,000, or face imprisonment for up to six months, or both.
2. Improve Accuracy and Reduce Errors
Preparing the EA Form at the last minute increases the chances of miscalculations, missing details, or incorrect reporting. These errors can lead to employee disputes, amendments, or even tax filing delays. Submitting the form early allows HR and finance teams to review and verify all data carefully, ensuring that salary details, statutory deductions, and allowances are accurately recorded.
3. Enhance Employee Satisfaction
Employees rely on the EA Form to file their personal income tax returns on time. Delays or errors in providing this document can cause frustration, leading to complaints or dissatisfaction with the company. Providing the EA Form early demonstrates professionalism and reliability, fostering trust and a positive workplace environment.
How Can Pandahrms Software Help with EA Form Compliance?
A payroll system simplifies EA Form preparation by:
- Automatically generating EA Forms with precise calculations, ensuring accuracy in employee earnings and deductions.
- Minimizing errors in statutory deductions such as PCB, EPF, and SOCSO, reducing the risk of miscalculations and penalties.
- Staying updated with the latest tax regulations, ensuring compliance with LHDN requirements without manual intervention.
- Providing easy access for employees, allowing them to download their EA Forms through a secure portal or mobile app.
