(Page last updated: 28 May 2015)
Before you can receive your final settlement (which will include your final salary and end of contract bonus, if applicable), you will need to clear your tax. This means that the tax office will ascertain your tax residency status for each year you have worked on the project and will decide whether you now owe any additional tax or are entitled to a rebate. The main change to tax clearance procedure, compared with what happened on ELTDP1, is that you will submit your own tax for clearance, rather than the project doing it on your behalf. This should speed up the process, reduce the amount of paperwork which will have to be sent backwards and forwards and put you in control of your own tax clearance.
This process of tax clearance is only for the mentor. Your dependants do not need to do it, unless, for example, your partner has been working here under their own work pass; in that case, they will have to clear their own tax.
Tax clearance procedure
Step 1: Preparation of documents
You will need to prepare:
1. One set of photocopies of all the pages of your passport (or passports, if you have renewed your passport during the time you have been employed on the contract), including the cover and including all the blank un-stamped pages, ie everything. Please see the advice below on how to photocopy your passport.
2. An in/out log like the In/Out Log download below. This is not strictly speaking required, but will help the IRB to assess your residency for tax purposes and may help to speed up the process.
3. Any receipts relevant to your tax submission, eg book receipts, computer invoices, etc. Submit these receipts at time of filing (you are advised to keep copies). To help the IRB you might consider stapling your receipts onto an A4 piece of paper and labelling each receipt, then putting the receipts in an envelope with your name on it and the tax year to which the receipts relate and using a separate envelope for each tax year.
You will also need the following documents in order to clear your tax:
4. A signed copy of your CP21 ( Notification by Employer of Employee’s Departure from the Country )
5. A signed copy of PCB (II) - Tax Paid in 2015
These last two documents will be provided by the British Council. We plan to hand out these documents to you during the zone meetings (12-14 August). (We suggest you make copies before submitting).
Step 2: Submitting your documents
As soon as you have received the two documents from the British Council, go to the appropriate* tax office and submit all your documentation to clear your tax. It takes a minimum of 10 working days to clear your tax; sometimes longer, so the sooner you submit your documents, the better. However, please note that you should not submit your documents until you have achieved tax residency in 2015. Most people will achieve this some time in July, but the four staff who arrived between February and April need to ensure they do not submit their tax too early to ensure they are considered tax resident. (We will be contacting these 4 people separately to explain what they need to do).
*The tax office appropriate to you is shown in the List of Tax Offices below showing which office you should visit. The main IRB branches are in Kuching, Sibu, Bintulu, Miri, Kota Kinabalu, Keningau, Tawau, Sandakan and Labuan. There are smaller branches (called Revenue Service Centres) in Limbang, Mukah, Sri Aman, Sarikei, Kudat and Lahad Datu. However, we strongly recommend that you clear your tax at one of the main branches. This is because if you submit your documents at one of the smaller branches, they will have to transfer your files to the main office which could lead to all sorts of problems and confusion (documents going missing, documents poorly scanned and therefore illegible, etc). We will transfer your tax file to the appropriate nearest main branch (which Lydiana has agreed with you) and they will clear your tax.
When you go to the tax office, explain you are leaving the country and wish to clear your tax. You will need to fill in form Borang BE (assuming you are resident in 2015). Non-residents fill in form Borang M (but it is assumed you will be resident when submitting your documents).
In order to pay your final settlement, the British Council requires the Tax Clearance Letter which the tax office will issue once they have assessed your final tax situation. Please ensure that the tax office is clear that the tax clearance letter should be sent to:
British Council, ELTDP Office
No 194 Lot 466 Al-Idrus Commercial Center,
Jalan Satok 93400, Kuching
Please get the tax officer’s name and contact number. This enables you to follow up with them if they do not send out your tax clearance letter within 10 working days.
Some of you will be entitled to a tax rebate. It is very important that you agree with the tax office how this will be paid to you. In the past, tax offices have promised to pay it into a local account, but for some reason this often does not work and they then issue a cheque. If you are no longer in the country, this can be a big problem as the cheque is only cashable in Malaysia and you might not receive the cheque if you have already left the country.
We therefore strongly advise you to ask the tax office to pay any rebate into your overseas account. You can give them an Overseas Account Details Letter like the one below to provide your overseas account details to the tax office.
Travel to clear your tax
For the main part, all costs associated with submitting your documents for tax clearance (photocopying, postage, travel, etc) are at your own expense. In most cases, staff will be able to visit the tax office during the day. However, staff in more remote locations can claim for essential travel expenses. This will be in cases where you need to:
- fly to your nearest office
- stay overnight
- travel more than 30 km (60km round trip). In this case only the portion over 60km can be claimed.
You must agree any absence with your PM. It is important that you submit your claim as soon as possible as this will be paid into your local account. Please ask the office to arrange your flights and hotel. No subsistence or PIE will be claimable.
Step 3: Payment of your final settlement
We hope to receive tax clearance letters by 18th September, at the latest. We are at the mercy of the tax offices regarding how quickly they will clear your tax, but we will inform tax offices why tax clearance is urgent and you should also follow up with the tax office if we do not receive your tax clearance letter after 10 working days. We will notifiy you when we receive it). Once the Kuching office has received your tax clearance letter, we will instruct HR in KL to release your final settelement (which has to be withheld by law until we receive your tax clearance letter).
Your final settlement will be paid into your local bank account to arrrive by 28 Sept at the latest, to give you time to transfer it out of the country before you leave on 30 Sept. If it is not possible to make payment by 28 Sept (eg because of a delay in your tax being cleared), we will pay your final settlement into your overseas account. You need to send us details of your overseas account on the attached Overseas Account Details Form by 3 Aug.
Obtaining a breakdown of your Final Settlement
Once we have made payment of your final settlement, we will send you an email with a summary of the payment made to you. This will look something like this:
- Final settlement amount withheld (see payslip): RMxxx
- Less balance of tax payable (see attached IRB tax clearance letter): RMxxx
- Balance amount paid: RMxxx
We will attach a copy of your tax clearance letter to this email, but in order to see a breakdown of your final settlement which is withheld, you need to download your final payslip. ELTDP does not have access to your payslips, so you must do this yourself. You will have access to your online payslip until 31 Oct 2015, but we recommend you download your online payslip as soon as you have received your final settlement.
We suggest that by 3 Aug you ensure you have access to your online payslips. Details have already been sent out on how to do this together with instructions on what to do if you cannot get access.
We strongly advise you to print out all your payslips for the period of your employment on ELTDP2 before your leave the project, in case you need these in future, eg for the tax authorities in your own country. You will cease to have access to your online payslips after 31 Oct 2015. Please note that ELTDP does not have access to your payslips at any time. If for some reason you still need to request a payslip after 31 Oct 2015, you should write to HR in British Council KL.
How to photocopy your passport
The IRB are very particular about how the photocopies look. You need to take a photocopy of each page of your passport (including the front and back covers and any blank pages). If you have replaced your passport during your time in Malaysia, you will need to copy your old passports too
• Position the passport in the middle of the page, not at the edge so that all the edges of the passport can be seen
• Ensure the copy is legible (colour is best but black and white is acceptable as long as it is clear)
• Don’t forget to copy the front and back of the passport and any blank pages
• Please see the download below example of a Passport Photocopy (in this example the personal details have been blacked out)
Brief summary of tax residence
The basic criterion for being tax resident in a given tax year is physical presence in Malaysia for 182 days (non-consecutive).
Tax residency in 2015
1. Staff who joined the project in the 6 Jan 2015 batch, and those who joined the project in 2014 should become resident for the tax year 2015 some time in July 2015 (depending on exactly when you arrived and any holidays you have taken outside Malaysia during 2015).
2. The 4 members of staff who joined the project between 23 Feb and 1 April 2015 are a special case and we will communicate with them separately regarding their tax residency and tax clearance procedure.
Tax residency in 2014
3. If you joined the project in 2014 between Jan and June 2014, you were able to attain tax residency for 2014 by 31 Dec 2014 and should have submitted a tax return by 30 April 2015.
4. If you joined the project in 2014 between July and Oct, you were unable to become tax resident by virtue of being in the country for 182 days in 2014, but as previously explained elsewhere, it was possible for you to become tax resident in 2014 by being tax resident in 2015 and linking your tax residency for the 2 years. You should have submitted a tax return by 30 April 2015.
Given the above, it was possible for all mentors to achieve tax residency in 2014 and 2015, but it is up to the IRB to rule on your tax residency during these 2 years on the basis of the information you provide to them regarding your physical presence in Malaysia. The downloadable document Resident Tax Information gives full details of the rules on tax residency. Disclaimer: The British Council does all it can to help you understand these rules, but cannot be held responsible for any errors or omissions.
The following website is useful for calculating days in and outside Malaysia: http://www.timeanddate.com/date/duration.html
Note: The day you first arrived in Malaysia is counted as a day in the country and if you travelled out of Malaysia during your stay here, both the day of departure from Malaysia and the day of arrival back in Malaysia are both counted as days on which you are in the country. For that reason, if you use the above website to calculate the number of days, you need to add one day to the result. You will also notice I have added one day to the calculations in the in/out log attached.