When an employee leaves, the employer must notify LHDN on Form CP22A at least 30 days before cessation, or Form CP21 at least 30 days before departure from Malaysia, and withhold money payable to the employee for 90 days or until a tax clearance letter is issued. Final wages fall due on the last day of employment under s.20 of the Employment Act 1955, and termination benefits within seven days.
- CP22A is due at least 30 days before cessation — a notification, not a post-exit formality.
- CP21 applies where the employee is leaving Malaysia for more than three months with no intention to return, also 30 days before.
- Money payable to the employee must be withheld for 90 days or until the tax clearance letter issues.
- Final wages are due on the last day of employment, not the next payroll cycle — s.20 Employment Act 1955.
- Statutory termination benefits fall due within seven days of the relevant date, with a written calculation.
- The employee register must be preserved so entries remain inspectable for at least six years — s.61(2).
- Non-compliance with the LHDN notification duties carries a fine of RM200 to RM20,000 or up to six months' imprisonment.
Who this applies to: HR, payroll and finance staff processing any employee exit in Peninsular Malaysia, including expatriates and foreign workers.
On this page
The exit interview is the part everyone remembers. The filings are the part that generates fines — and one of them, the tax-clearance withholding duty, is the reason a payroll officer who released a final salary on time and in good faith can end up explaining it to LHDN.
The trap is a genuine collision between two agencies. The Employment Act 1955 says pay the employee on their last day. LHDN says hold the money for 90 days or until tax clearance issues. Getting this wrong in either direction is a breach, and which rule governs depends on whether the case actually requires a tax clearance letter.
The deadlines, in order
| Duty | Deadline | Authority |
|---|---|---|
| Form CP22A — cessation of employment | ≥30 days before cessation (or ≤30 days after being informed of a death) | LHDN |
| Form CP21 — employee leaving Malaysia >3 months, no intention to return | ≥30 days before departure | LHDN |
| Withhold money payable pending tax clearance | 90 days or until the clearance letter issues | LHDN |
| Final wages, normal termination | Day of termination (s.20) | JTKSM |
| Final wages, employee left without notice | 3rd day after (s.21(2)) | JTKSM |
| Termination benefits + written calculation | 7 days after the relevant date | JTKSM |
| Form PK Part V (retrenchment or VSS only) | 14 days after the exercise | JTKSM |
| Form PK Part VI (retrenchment or VSS only) | 30 days after the exercise | JTKSM |
| Foreign domestic employee — inform the DG | 30 days after termination (s.57B) | JTKSM |
| Employee register retention | Inspectable for 6 years (s.61(2)) | JTKSM |
Note that the two LHDN notification duties run before the exit, not after it. An employee who resigns with four weeks’ notice leaves barely enough room for the 30-day CP22A window, and one who resigns with immediate effect leaves none — file as soon as the cessation is known.
The withholding duty in practice
LHDN’s instruction to employers is to withhold any money payable to the employee for 90 days or until a tax clearance letter is received, in cases of cessation of employment, death, or departure from Malaysia without an intention to return. Submission for cases requiring clearance runs through the e-SPC application on the MyTax portal, which has been the channel since 1 September 2024.
Two cautions, and they point in opposite directions.
Do not release early on a case that requires clearance. The whole point of the retention is that the fund is still there when the tax position is settled. Non-compliance with the notification and withholding duties carries a fine of RM200 to RM20,000, or imprisonment up to six months, under s.120(1) of the Income Tax Act 1967.
Do not withhold on a case that does not require clearance. The duty attaches to tax-clearance cases, not to every leaver. Holding back a local employee’s final salary for 90 days where no clearance is required is a straightforward breach of ss.20 and 21 of the Employment Act 1955, and s.15(1) deems an employer who fails to pay wages under Part III to have broken the contract.
Establish which category the employee falls into first. That single decision governs the entire final-pay timeline.
Statutory schemes
EPF. Contributions cease with the last wage month; KWSP’s published cessation duties address ceasing to be an employer rather than individual leavers. No per-employee cessation filing was confirmed.
PERKESO. An employee’s resignation date is recorded through the ASSIST portal. The 30-day filing period found in PERKESO’s material relates to ceasing as an employer, using Form 1A under Act 4 and Form SIP 3 under Act 800 — not to individual exits.
HRD Corp. Levy follows the wage bill, so it falls away with the final payroll. If the exit takes headcount below the mandatory threshold, the registration category may change — that is a separate question from the exit itself.
Immigration. An Employment Pass or PLKS is tied to the sponsoring employer and does not simply lapse quietly. Cancellation or shortening runs through the Expatriate Services Division portal, or the relevant sector regulator where the pass was sponsored outside ESD. Leaving a pass active after the employment ends is a live compliance risk for the employer, not the departing employee.
Common mistakes
Filing CP22A after the employee has gone. The deadline is 30 days before cessation.
Waiting for the next payroll run. Sections 20 and 21(1) both say the day of termination. Only where the employee walked without notice does s.21(2) give three days.
Withholding everything by default. The 90-day retention is not a universal rule, and applying it to a straightforward local resignation breaches the Employment Act.
Netting termination benefits against notice pay. Regulation 6(4) of the TBLB Regulations 1980 makes them cumulative.
Skipping the written calculation statement. Regulation 12(1) requires it at the same time as payment, and omitting it is a separate offence.
Forgetting Form PK Parts V and VI. Where the exit is part of a retrenchment or VSS, two filings fall due after the exercise.
Destroying the personnel file on exit. Section 61(2) requires entries to remain inspectable for at least six years.
Leaving the work pass live. The employer sponsors it, and the employer carries the exposure.
What’s next
Build the sequence into the resignation workflow rather than the exit checklist: the moment a cessation date is known, decide the tax-clearance question, file CP22A or CP21, and set the final-pay date from that answer. For how the exit was reached and what is owed, see termination-of-employment-malaysia and termination-benefits-malaysia; for a group exercise, retrenchment-malaysia.
When must Form CP22A be submitted?
Not less than 30 days before the cessation of employment. Where the cessation is by reason of death, the notification is due not more than 30 days after the employer is informed of the death. Since 1 September 2024 submission is through the e-SPC application on the MyTax portal for cases requiring a tax clearance letter.
How long must an employer withhold an employee's final pay?
LHDN requires the employer to withhold any money payable to the employee for 90 days, or until a tax clearance letter is received, whichever comes first. This applies on cessation of employment, on death, and where the employee is leaving Malaysia without an intention to return. It sits alongside, and in practice overrides the timing of, the Employment Act deadlines for final wages.
Does the 90-day withholding apply to every departing employee?
No. It is tied to the tax clearance requirement, which turns on the employee's tax position and residence status rather than applying automatically to every leaver. Check whether the case requires a tax clearance letter before withholding pay, because withholding wages that are not subject to the duty is itself a breach of the Employment Act.
What happens to an Employment Pass when the expatriate resigns?
The pass is tied to the sponsoring employer, so it must be cancelled or shortened rather than left to run. The process is handled through the Expatriate Services Division portal or the relevant sector regulator. The specific deadline was not verifiable from published ESD material and should be confirmed with ESD or Immigration directly.
The following are deliberately unstated or described only qualitatively until confirmed by a subject-matter expert:
- The Income Tax Act 1967 section numbers underlying CP22A, CP21 and the 90-day withholding duty were not confirmed — LHDN's employer page states the duties without citing sections, and phl.hasil.gov.my refused connections. Do not cite s.83(3) or s.83(4) without checking the Act text.
- Whether an employer who releases money before tax clearance becomes personally liable for the employee's outstanding tax. This is widely asserted online and is plausible given the withholding duty, but no official statement of a liability transfer was located. The confirmed consequence is the s.120(1) penalty of RM200 to RM20,000 or up to six months' imprisonment.
- Whether EPF requires any per-employee cessation filing. KWSP's published duties address cessation as an employer, not individual leavers; the practical position appears to be that contributions simply stop. Confirm with KWSP.
- The PERKESO channel for recording an individual resignation is the ASSIST portal, but no statutory deadline for it was located. The 30-day period found relates to cessation as an employer using Form 1A (Act 4) and Form SIP 3 (Act 800).
- Employment Pass and PLKS cancellation deadlines — not verifiable from esd.imi.gov.my, which serves a login shell to automated retrieval.
Sources
- Employer's responsibilities — LHDN
- Employment Act 1955 (Act 265) — JTKSM
- Employment (Termination and Lay-Off Benefits) Regulations 1980 — JTKSM
- Borang PK — Pemberitahuan Pemberhentian Pekerja 2004 — JTKSM
- Compliance and enforcement — employer responsibilities — KWSP
Change history
| Version | Date | Change | By |
|---|---|---|---|
| 01.00 | 20 Jul 2026 | Approved and published. | — |