When a Foreign Employee Leaves Malaysia: Employer Checklist for 2026 (CP21, Pass Shortening, EPF)
When an Employment Pass holder leaves your company and Malaysia for good, the employer has duties to the tax office and to Immigration, and missing them can mean fines or a blocked ESD account. This checklist covers what HR needs to do in 2026, in order: Form CP21, shortening the pass, Exit Clearance, final pay and helping the employee withdraw their EPF savings.
💡 Key takeaway: At least 30 days before the employee leaves Malaysia, submit Form CP21 to LHDN and hold back money due to them until LHDN allows payment (up to 90 days after it receives the form). Before they leave, shorten their pass in ESD Online. If a pass approved from 18 November 2025 expires without being shortened or renewed, declare the exit through Exit Clearance within 30 days, or your company cannot submit new applications.
The checklist at a glance
| When | What HR does | Where |
|---|---|---|
| At least 30 days before departure | Submit Form CP21 (employee leaving Malaysia) | LHDN, MyTax e-SPC |
| From CP21 submission | Hold back money due to the employee until LHDN allows payment, for up to 90 days after it receives CP21 | Payroll |
| Before departure | Shorten the employee's pass and download the Shorten Pass Slip | ESD Online, Sub-Product tab |
| Before departure | Help the employee apply to withdraw their EPF savings | KWSP |
| Last working day | Pay final wages and settle notice as the contract sets out | Payroll |
| Within 30 days of pass expiry, if not shortened or renewed | Declare the exit through Exit Clearance | ESD Online, Application tab |
1. Form CP21: tell LHDN before the employee leaves
LHDN says that if an employee who is subject to tax on employment income leaves or intends to leave Malaysia for more than 3 months, the employer must submit Form CP21 not less than 30 days before the expected departure date. Since 1 January 2024 it is submitted online through MyTax e-SPC.
- Hold back payments. The employer must not pay out money due to the employee without LHDN's permission until 90 days after LHDN receives the CP21. Plan the final salary, bonus and any other payments around this.
- Exception. CP21 is not needed when the employee has to leave Malaysia frequently for work and LHDN accepts this.
- Penalty. Failing to comply can lead to a fine of RM200 to RM20,000, up to 6 months in prison, or both.
The employee's own tax return still applies. A non-resident is taxed at 30%, and returns are due by 30 April of the following year. See what it costs to hire a foreign engineer for the tax basics.
Hiring a foreign engineer for your team?
Seekers is a licensed tech recruitment agency in Kuala Lumpur. We find Malaysian and foreign engineers, and if your hire needs an Employment Pass, we can support the application. EP support is quoted separately from the recruitment fee.
Talk to us about a hire →Not sure the salary qualifies? Check the Employment Pass category with our free EP checker.
2. Shorten the pass before the employee leaves
ESD says the company must shorten the expatriate's current pass before they permanently leave the country. This is compulsory "regardless of their pass' balance validity period", even if only a few days are left. Submit the Shorten Pass application in ESD Online under the Sub-Product tab, then download the Shorten Pass Slip from the Completed list as proof.
If the employee is moving to another company in Malaysia instead of leaving, the new employer applies for a new pass. See the change of employer checklist.
3. Exit Clearance if the pass simply expires
For Employment Pass and Professional Visit Pass holders whose applications were approved in ESD Online from 18 November 2025, ESD checks whether the person has left after the pass expires without a renewal or Shorten Pass.
- ESD Online monitors for up to 30 days after expiry. The company has 30 days from the latest pass expiry date to declare the exit.
- If no exit is detected within 30 days, the company must declare the exit information under Pending Exit Declaration within 7 days.
- Documents: a full copy of the latest passport, and one of: proof of exit (exit stamp, boarding pass or autogate slip), a pass shortened abroad by a Malaysian embassy, or a statutory declaration with a justification letter from the employer.
- If you do not submit it, ESD restricts your company's ESD Online account and you cannot submit new applications. That can stop your next foreign hire.
Shortening the pass before departure avoids this step altogether.
4. Final pay and notice
Final pay and notice follow the contract of service. If the contract does not set a notice period, the Employment Act sets 4 weeks for under 2 years of service, 6 weeks for 2 to 5 years and 8 weeks for 5 years or more. Remember the CP21 hold on payments above. See our offer letter guide for how notice terms are usually written.
5. Help the employee withdraw their EPF savings
Since October 2025 wages, foreign employees contribute to the EPF. KWSP says expatriates and foreign workers who are no longer employed or intend to leave Malaysia can withdraw all of their EPF savings.
- The employee applies with Form KWSP 9K (AHL), a copy of their passport and an active account at an EPF panel bank.
- Passport details must match the EPF record and the bank record, and the bank account must stay active until the payment is complete.
- From 1 November 2026, the employee also brings a bank document confirming the account holder's details.
- KWSP advises applying early, once the work pass is cancelled.
Settling in a foreign employee
- Relocating a foreign employee: HR checklist
- Renting a home for a foreign employee: deposits and stamp duty
- Opening a bank account for a foreign employee
- Driving in Malaysia: licences for foreign employees
- Healthcare, SOCSO and EPF for foreign employees
- Income tax for foreign employees: what HR does
- Bringing the family: Dependant Pass, school and spouse work
- How to apply for an Employment Pass, step by step
How Seekers can help
Seekers is a licensed tech recruitment agency in Kuala Lumpur. When a foreign engineer leaves, we can help you find the replacement, Malaysian or foreign. If your next hire needs an Employment Pass, we can support the application. EP support is quoted separately from the recruitment fee. Talk to us about a hire.
Frequently asked questions
When must an employer submit Form CP21 in Malaysia?
Not less than 30 days before the employee's expected departure, when they leave or intend to leave Malaysia for more than 3 months. It is submitted online through MyTax e-SPC.
Do we need to cancel the Employment Pass when the employee leaves?
Yes. ESD requires the company to shorten the current pass before the employee permanently leaves Malaysia, however much validity is left.
What is Exit Clearance in ESD Online?
A declaration that an expatriate has left Malaysia after their pass expired without being shortened or renewed. It applies to EP and PVP holders approved from 18 November 2025. If it is not submitted, the company's ESD Online account is restricted.
Can a foreign employee withdraw EPF when leaving Malaysia?
Yes. Expatriates who are no longer employed or are leaving Malaysia can withdraw all of their EPF savings, using Form KWSP 9K (AHL), their passport and an active account at an EPF panel bank.
Sources
CP21: LHDN, notification of cessation of employment (updated 8 September 2026). Tax filing: LHDN Public Ruling 2/2026 on foreign nationals exercising employment in Malaysia. Pass shortening and Exit Clearance: ESD, Pass Shortening and Exit Clearance FAQ (November 2025). EPF: KWSP, leaving the country and employers' role in EPF withdrawal for non-Malaysian employees (6 July 2026). Notice periods: Employment Act 1955, section 12, as published by the Labour Department (JTKSM). This guide is general information, not legal or tax advice. Last checked: 27 October 2026.