After the employer tax reference number has been registered, the employer is required to determine MTD calculation is accordance with Income Tax (Deduction From Remuneration) Rules 1994 (MTD Rules) according to Explanatory Notes gazette by IRBM.
Employer shall pay to the Director General, not later than the tenth day of every calendar month; the total amount of tax deducted or should have been deducted by him from the remuneration of employees during the preceding calendar month.
Every employer shall, for each year, prepare and render to his employee a statement of remuneration of that employee C.P.8A (EA) and C.P.8C (EC) form on or before the last day of February in the year immediately following the first-mentioned year in order for each employee to fill and submit return form in accordance to subsection 83(1A), Income Tax Act 1967(Act).
Every employer shall, for each year, furnish to the Director General a return in the prescribed form (E form) not later than 31 March in the year immediately following the first-mentioned year in accordance to subsection 83(1), Act.
SCHEDULE OF MONTHLY TAX DEDUCTION :
LIST OF SOFTWARE PROVIDER/EMPLOYER WHO COMPLIED WITH THE MTD CALCULATION SPECIFICATION :
MTD 2012:
MTD 2013:
Employer's Responsiblities
Employer's responsibilities under the MTD Rules are as follows:
- Deduct the MTD from the remuneration of employee in each month or the relevant month in accordance with the Schedule of Monthly Tax Deductions or Computerised Calculation Method and pay to the Director General.
- Make additional deductions from employee's remuneration in accordance with the direction given by the Director General under Rule 4 of MTD Rules.
- Employer shall pay to the Director General, not later than the tenth day of every calendar month, the total amount of tax deducted or should have been deducted by him from the remuneration of employees during the preceding calendar month.
- Furnish a complete and accurate employee‟s information of the following in a return when submitting MTD payments/additional deductions:
- income tax number (if any);
- name as stated on identity card or passport;
- new and old identity card number/police number/army number or passport number (for foreign employee); and
- MTD/additional deductions amount.
If the employer fails to furnish a complete and accurate information, MTD payment will not be accepted. Resubmission of MTD payment may be compounded if payment is made after the tenth day of the following month.
- To furnish information on cessation of payment of employees‟ remuneration as required under Rule 13, MTD Rules in a prescribed form.
- Keep and retain in safe custody sufficient documents for a period of seven years from the end of the calendar year in which the remuneration is deducted in respect of his employee according to the MTD Rules.
- Inform every employee of his following responsibilities:
- to submit a TP3 Form to the employer to notify information relating to his employment with previous employer in the current year.
- to submit a TP1 Form to the employer if employee wishes to claim deductions and rebates in the relevant month. The deductions and rebate will be effected subject to approval by employer.
- to submit a TP2 Form if employee wishes to include benefits in kind (BIK) and value of living accommodation (VOLA) as part of his monthly remuneration in ascertaining the MTD amount subject to approval by employer.
- to keep and retain in safe custody each and every receipt relating to claims of deductions for a period of seven years from the end of that year of assessment under the Act.
- to furnish complete and accurate personal information and update any changes of his personal particulars to the employer.
- to furnish correct information in a prescribed form relating to his own chargeability to tax and failure by the employee to do so constitutes an offence under paragraph 113(1)(b) of the Act.
- Pursuant to section 75A of the Act, directors of controlled companies are responsible for unpaid MTD under the MTD Rules.
Schedule of Monthly Tax Deductions
Schedule of Monthly Tax Deductions is issued by Inland Revenue Board of Malaysia (IRBM) for employer who does not use computerised payroll software.
Employee Category
Schedule of Monthly Tax Deductions and the Computerised Calculation Method classifies employee into 3 categories:
Category 1 : Single
Category 2 : Married and spouse is not working
Category 3 : Married and spouse is working
Category 3 of the Schedule of Monthly Tax Deductions or the Computerised Calculation Method is applicable where an employee is divorced, widowed or a single (with adopted children).
Where a wife who elects to claim all child deductions, her MTD is ascertained under Category 3 (KA1 – KA20) while MTD for the husband is ascertained under Category 3 (K).
Where a husband and wife elect to claim deduction for certain child, MTD for husband and wife is ascertained under Category 3 (KA1 – KA20).
Example :
A working husband and wife with 5 children. The husband claims child deduction for their 3 children and the wife claims for the remaining 2 children. MTD is ascertained as follows:
Husband - Category 3 (KA3)
Wife - Category 3 (KA2)
MTD is ascertained under Category 3 (KA1 – KA20) for an employee who is single with an adopted child.
MTD for Monthly Remuneration
Before MTD can be determined, an employer must take into account 3 factors relating to his employee. The factors are :
- Total monthly remuneration
- Marital status
- Number of children
- MTD computation method using schedule MTD.
Employer whose compute PCB using the schedule of MTD shall base on gross taxable remuneration less EPF (inclusive EPF for non taxable remuneration/allowance) limited to RM500 per month if the actual deduction exceeds RM500.
Example 1 :An employee receives a monthly remuneration amounting to RM10,000. EPF deduction is RM1,100.
Determination of remuneration subject to MTD is as follows :
| Monthly remuneration | RM10,000 |
| Less : EPF allowed to be deducted | RM 500 |
| Net remuneration subject to MTD | RM 9,500 |
The following example can be a guide to determine the value of MTD to be deducted from an employee
according to category under the MTD Schedule.
Example 2:
An employee receives a monthly remuneration amounting to RM4,000 (EPF deduction : RM440). So, the net remuneration he receives is RM3,560.
Example 3:
An employee is married and wife is not working. They do not have children. Total monthly remuneration received is RM25,000. (EPF deduction : RM2,750). So, the net remuneration he receives is RM24,500.
- MTD computation method using computerised calculation method.
Employer whose compute PCB using the computerised calculation method, such as ‘Kalkulator PCB’, e-PCB, computerised payroll system, or inhouse/customise payroll system which had verified by IRBM shall base on gross taxable remuneration less total contribution monthly EPF (inclusive EPF for non taxable remuneration/allowance) limited to RM6,000.
Example 4:
An employee receives a monthly remuneration amounting to RM11,000 (EPF deduction : RM1,210). So, the net remuneration he receives under computerised calculation method is RM9,790 (RM11,000 – RM1,210).
For month of May, EPF contribution that employee could claim should be RM1,160 [RM6,000 – (RM1,210 x 4 month) due to accumulated EPF for the month of May is RM 4,840(RM1,210 x 4 month). For computerised calculation method, formula/system is default to restrict the EPF contribution and lifeinsurance claim by employee is not more than RM6,000.
From month of June onward , employee is not allow to claim deduction for EPF and life insurance due to the accumulated EPF is RM6,000.
Example 5:
An employee receives a monthly remuneration amounting to RM4,000 (EPF deduction : RM440). So, the net remuneration he receives is RM3,560.
Filling Up MTD Form (CP39/CP39A)
An employer should give complete and accurate information about his employees when making MTD payments. The information required is as follows:
- Employee's income tax number (if any);
- Employee's full name as stated in identity card or passport;
- Identity card number (Old and New) or Police Number or Army Number;
- Passport number and country code for foreigner; and
- MTD amount.
The MTD payment will be rejected by IRBM if employer fails to provide complete and accurate information. Resubmission of MTD payment will be subject to compound if the payment is made after the due date.
- Form CP39 is for normal MTD, bonus and director’s fee paid for current month and/or CP38 instruction.
- Form CP39A is for arrears payment for remuneration/allowance and other types of payment for previous year.
Use separate CP39 if payment is made for different months.
Filling Up Form CP39
This information enables you to fill the form correctly.
- Deduction for Month/Year
Fill in Month and Year using numbers only.
Example: Deduction for September, 2010, fills in as follow:
Month column: 09
Year column: 2010
- Employer's Information
- E Number : Fill in the employer's tax number using10 digits.
Example :
E 908915-10 - fill in as 0090891510
E 3943914-03 -fill in as 0394391403
E 90001541-01 - fill in as 9000151401
- Company/Business Name
- Fill in company's full name.
- Company/Business Address.
- Fill in company's full address (including postcode).
- Company Registration Number
- Fill in company's registration number.
- Payment Information
- Total deduction
- Fill in total MTD deduction made and total CP38 deduction (if any).
- Total employees
- Please enter the number of employees subject to MTD and the number of employees subject to CP38 deduction (if any).
- Amount
- Number
- Bank Branch
- Refers to bank branch of cheque.
- Date
- Fill in cheque date using numbers.
- Example : 3rd October 2006 - fill in as 03.10.2006
- Officer Filling the Form
- Signature
- Signature of officer filling the form.
- Full Name
- Full name of officer filling the form.
- Identity Number
- Identity number of officer filling the form.
- Designation
- Designation of officer filling the form.
- Telephone Number
- Company's telephone number.
- Information on Employees
- Number
- Fill in the record number according to sequence.
- Income Tax Number
- Leave blank this item if the employee does not have an income tax number. Employer can attach Form CP22 or Form In Lieu of CP39 together with Form CP39 when make MTD payment.
- For employees who have an income tax number, fill in the number in this item.
- Example : SG 1234567-08(0)
- Employee's Full Name
- Fill in employee's name as per Identity Card or Passport.
- Employees not subject to monthly deduction need not be included in list.
- Old Identity Card Number
- Fill in the old identity card number for local employees (if any).
- New Identity Card Number
- Fill in the new identity card number for local employees, without the dash.
- Employee's Number
- Fill in employee's number or employee's salary number, if any.
- Passport Number
- This item to be filled in for foreign employees only. Fill in employee's passport number.
- Country Code
- To be filled up if the employee is a foreigner.
- MTD
- Fill in the amount according to the Scheduler Tax Deduction schedule.
- CP38
- Fill in the amount of tax deduction according to the CP38 Form.
- If there is no deduction, leave this item blank.
Filling Up Form CP39A (Arrears payment for prior years received in current year)
This information enables you to fill the form correctly.
- Deduction for Month/Year
Fill in Month and Year using numbers only.
Example: Deduction for arrears payment year 2009, fills in as follow:
Month column: 12
Year column: 2009
- Employer's Information
- E Number :
Fill in the employer's income tax number using10 digits.
Example :
E 908915-10 - fill in as 0090891510
E 3943914-03 -fill in as 0394391403
E 90001541-01 - fill in as 9000151401
- Company/Business Name
- Fill in company's full name.
- Company/Business Address.
- Fill in company's full address (including postcode).
- Company Registration Number
- Fill in company's registration number.
- Payment Information
- Total deduction
- Fill in total MTD deduction made and total CP38 deduction (if any).
- Total employees
- Please enter the number of employees subject to MTD and the number of employees subject to CP38 deduction (if any).
- Amount
- Number
- Bank Branch
- Refers to bank branch of cheque.
- Date
- Fill in cheque date using numbers.
- Example : 3rd October 2006 - fill in as 03.10.2006.
- Officer Filling the Form
- Signature
- Signature of officer filling the form
- Full Name
- Full name of officer filling the form
- Identity Number
- Identity number of officer filling the form
- Designation
- Designation of officer filling the form
- Telephone Number
- Company's telephone number.
- Information on Employees
- Number
- Fill in the record number according to sequence.
- Income Tax Number
- Leave blank this item if the employee does not have an income tax number. Employer can attach Form CP22 or Form In Lieu of CP39 together with Form CP39 when make MTD payment.
- For employees who have an income tax number, fill in the number in this item.
- Example : SG 1234567-08(0)
- Employee's Full Name
- Fill in employee's name as per Identity Card or Passport.
- Employees not subject to monthly deduction need not be included in list.
- Old Identity Card Number
- Fill in the old identity card number for local employees (if any).
- New Identity Card Number
- Fill in the new identity card number for local employees, without the dash.
- Employee's Number
- Fill in employee's number or employee's salary number, if any.
- Passport Number
- This item to be filled in for foreign employees only. Fill in employee's passport number.
- Country Code
- To be filled up if the employee is a foreigner.
- MTD
- Fill in the amount according to the Scheduler Tax Deduction schedule.
- CP38
- Fill in the amount of tax deduction according to the CP38 Form.
- If there is no deduction, leave this item blank.
In Lieu of CP39 Form
This form is to be used for registration of an income tax file for individuals who receive employment income. The employee must fill in this form using CAPITAL LETTERS.
The completed form can be forwarded to the nearest IRBM Branch. Please attach a copy of identity card together with the registration form.
Guide to filing in Form In Lieu of CP39
- EMPLOYEE INFORMATION
- EMPLOYER NAME
- State your employer's full name.
- EMPLOYER'S INCOME TAX NUMBER
- 'E' number can be obtained from your employer or Form EA/EC.
- EMPLOYEE'S NAME
- Employee's full name as per identity card or passport for foreigner.
- EMPLOYEE OR SALARY NUMBER
- Enter your salary or staff number, if any.
- IDENTITY NUMBER
- OLD - fill in this column if you have the old identity card number
- NEW - fill in with your new identity card number
- POLICE NUMBER
- Enter your Police Number, if applicable.
- ARMY NUMBER
- Enter your Army Number, if applicable
- INCOME TAX NUMBER
- Enter your income tax number, if any.
- IN WHICH YEAR WAS THE FIRST MTD MADE
- Enter year your first MTD was made.
- DATE YOU STARTED WORKING
- Date you started working in Malaysia.
- SEX
- Mark 'X' in applicable box, either male or female.
- MARITAL STATUS
- Mark 'X' in applicable box, either single person, married, widow, widower or expired.
- DATE OF MARRIAGE
- Enter your date of marriage (if applicable).
- CORRESPONDENCE
- Enter your correspondence address.
- PASSPORT NUMBER
- If you are not a Malaysian citizen, please enter your birth date and passport number. Attach a copy of the first page of your passport.
Example:
| Date of Birth : |
1
|
4
|
0
|
2
|
7
|
5
|
| Passport No. : |
R
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
| | | | |
- HUSBAND/WIFE INFORMATION
- HUSBAND/WIFE NAME
- Enter husband/wife's full name as per Identity Card.
- IDENTITY CARD NUMBER
- OLD - please enter old identity card number, if any.
- NEW - fill in with new identity card number.
- POLICE NUMBER
- Enter Police Number, if applicable.
- ARMY NUMBER
- Enter Army Number, if applicable.
- HUSBAND INCOME TAX NUMBER
- If you are a married woman, please enter your husband's income tax file number, if any.
- PASSPORT NUMBER
- If not a Malaysian citizen, please enter birth date and passport number. Attach a copy of the first page of passport.
Failure to Comply with MTD
Failure to comply with Monthly Tax Deduction will render an employer liable to prosecution under Rule 17, Income Tax (Deduction from Remuneration) Rules 1994 ["The Rules"]. Under this Rule, any person, who, without any reasonable reason fails to comply with Subrule 10(1) or Rule 3 is liable to prosecution and upon conviction, can be fined up not less than RM200 and not more than RM2,000 or to imprisonment for a term not exceeding six months or to both.
Types of offences unde "The Rules" are :
- Failure to remit monthly tax deduction of employees by the 10th. of the following month.
- Failure to deduct and / or less deduct monthly tax deduction of employees.
- Failure to remit or less remit MTD or CP38 deduction that has been made from employees' remuneration.
- Failure to give complete and accurate information about employees.
MTD computation for additional remuneration year 2008 and before
- Bonus (Additional Remuneration) formula 2004
Where a bonus/additional remuneration is paid on or before 2008 to an employee in addition to normal monthly remuneration, the amount of additional tax to be deducted in the month in which the relevant amount (the "additional payment") is made shall be calculated based on Bonus Formula 2004 and respective year of schedule MTD as follows:
- Determine the tax deduction on monthly remuneration (not including additional remuneration).
- (1/12 X Nett Bonus) + Monthly net remuneration.
- Determine the tax deduction on [B].
- Determine the tax deduction on additional remuneration.
- Total amount of tax to be deducted in the month that Bonus is paid will be [A] + [D].
Net remuneration refers to total remuneration less compulsory contribution to Employees Provident Fund or any other approved pension fund.
Scenario 1: Year 2008 additional remuneration paid in 2008
An employee received bonus and director’s fee in and for year 2008. If additional remuneration is paid in the same year (e.g. Bonus 2008 is paid in the year 2008), MTD computation for Step [A] under Bonus Formula should be based on current monthremuneration for the respective year and by using the respective MTD schedule for that year as follows:
- Use MTD Schedule (Amendment 2004).
- Current month remuneration 2008 will be taken as a basis to compute MTD for step [A] Bonus Formula.
- MTD payment for additional and monthly remuneration must be combined together and need not be separated.
- Use Form CP39 to make payment.Only submit 1 form CP39 for MTD current month.
Scenario 2: Year 2007 additional remuneration paid in 2008An employee received bonus and director’s fee in year 2008 for year 2007. If additional remuneration paid during the year is for previous year's remuneration, MTD computation for Step [A] under Bonus Formula should be based on December remuneration for the respective year and by using the respective MTD schedule for that year as follows:
- Use MTD Schedule (Amendment 2004).
- Remuneration in December 2007 will be taken as a basis for computation of MTD for step [A] Bonus Formula.
- Use a separate form when making MTD payment for current month remuneration and additional remuneration.
- Form CP39A for additional remuneration MTD.
- Form CP39 for current month MTD.
- MTD computation method
Example 1 :Year 2008 additional remuneration paid in 2008
Year 2008, En Ali is working with ABC Sdn Bhd. He is married and his wife is working. They have 2 children both under 18 years old. He receives a monthly remuneration of RM3,600 (EPF deduction : RM396). In June, his company declared a bonus amounting to RM7,200 (EPF deduction : RM792).COmpute MTD for June.
Computation :
MTD Category : CATEGORY 3/KA2
[A] Determine the tax deduction on monthly remuneration (not including additional remuneration).
Monthly remuneration
|
RM3,600.00
|
|
|
Less : EPF
|
RM 396.00
|
|
Net remuneration
|
RM3,204.00
|
|
MTD on RM3,204 = RM48.00 [Refer MTD Schedule 2004].
[B] (1/12 X Nett Bonus) + Monthly net remuneration
Total Bonus
|
RM7,200.00
|
|
Less : EPF*
|
RM 104.00
|
|
Net Bonus
|
RM7,096.00
|
|
|
|
|
*Deduction for EPF is limited to RM500 per month. [RM500 - RM396.00 = RM104.00].
|
(1/12 X RM7,096.00) + RM3,204.00 = RM3,795.00
[[C] Determine the tax deduction on [B].
MTD on RM3,795.00 = RM102.00
[[D] Determine the tax deduction on additional remuneration.
(RM102.00 – RM48.00) X 12 = RM648.00
[E] Total amount of tax to be deducted in the month that Bonus is paid will be [A] + [D].
RM48.00 + RM648.00 = RM696.00
MTD for month of December is RM 696 and pay using Form CP39 only.
Example 2 : Year 2007 additional remuneration paid in 2008
Refer to example 1, for July year 2008, He also received arrears of salary for 2007 amounting to RM1,200. Please compute January PCB for En. Ali.
Computation :
MTD Category : CATEGORY 3/KA2
[A] Determine the MTD on monthly remuneration (not including additional remuneration).
Monthly remuneration
|
RM3,600.00
|
|
|
Less : EPF
|
RM 396.00
|
|
Net remuneration
|
RM3,204.00
|
|
MTD on RM3,204 = RM48.00 [Refer MTD Schedule 2004].
[B] (1/12 X Nett Bonus) + Monthly net remuneration
Total Bonus
|
RM1,200.00
|
|
Less : EPF*
|
RM 104.00
|
|
Net Bonus
|
RM1,096.00
|
|
|
|
|
*Deduction for EPF is limited to RM500 per month. [RM500 - RM396.00 = RM104.00].
|
(1/12 X RM1,096.00) + RM3,204.00 = RM3,295.00
[C] Determine the MTD on [B].
MTD on RM3,295.00 = RM50.00
[D] Determine the MTD on additional remuneration.
(RM50.00 – RM48.00) X 12 = RM24.00
[E] Total amount of MTD to be deducted in the month that arrears salary paid will be
= RM24.00 (use Form CP39A)
MTD computation for additional remuneration year 2009 onward
Remuneration
Remuneration means income in respect of the gains or profits from an employment other than benefits in kind under paragraphs 13(1)(b) and 13(1)(c) of the Act provided that in a case where an irrevocable election is made by an employee under rule 2A, the gains or profits from an employment shall include the benefits in kind under paragraphs 13(1)(b) and 13(1)(c) of the Act.
“Normal remuneration” means monthly fixed remuneration paid to an employee whether the amount is fixed or variable as stated in the employment contract written or otherwise.
“Additional remuneration” means any payment paid to an employee either in one lump sum or periodical or in arrears or non fixed payment or any additional payment to a current month's normal remuneration. Such additional remuneration includes:
- overtime allowance
- bonus/incentive
- arrears of salary or any other arrears paid to an employee
- employee's share option scheme (if employee opts for MTD deduction)
- tax borne by employer
- gratuity
- compensation for loss of employment
- ex-gratia
- director's fee (not paid monthly)
- commissions
- allowances (variable amount either paid every month or not )
- any other payment in addition to normal remuneration for current month
Types of Remuneration Subject to MTD
|
|
- director fees
|
- wages
|
- perquisite
|
- overtime payment
|
- employee's share option scheme (ESOS)
|
- commission
|
- tax borne by the employer
|
- tips
|
- gratuity
|
- allowance
|
- compensation for loss of employment
|
- bonus/ incentive
|
- other remuneration related to employment
|
Note: Beginning from the year of assessment 2009, director fees or bonus relating to a year which is received in any current year, that remuneration becomes part of remuneration in the current year it is received.
Types of Remuneration Not Subject to MTD
BIK and VOLA are part of remuneration which is not subject to MTD. However, employee may make an irrevocable election to include the BIK and VOLA as part of his remuneration to be subject to MTD by completing a prescribed form and submit to employer. If employer agrees, BIK and VOLA are subjected to MTD.
- Benefits in Kind (BIK)
BIK is benefits not convertible into money. The benefits are to be treated as gross income from employment under paragraph 13(1)(b) of the Act.
- Value of Living Accommodation (VOLA)
VOLA is living accommodation provided for an employee by his employer. The value of the benefit is to be treated as gross income from employment under paragraph 13(1)(c) of the Act.
Deduction for Zakat
- Schedule of MTD
Where an employee has made zakat payments through salary to the religious authority, the employer upon receiving evidence of such payments may set-off those payments against the amount of tax to be deducted for the respective month.
Example 1: MTD for January 2010
|
RM
|
|
MTD deductible according to schedule
|
105.00
|
|
Zakat paid
|
55.00
|
|
MTD to be deducted
|
50.00
|
(105.00 – 55.00)
|
Example 2: MTD for February 2010
|
RM
|
|
MTD deductible according to schedule
|
110.00
|
|
Zakat paid
|
140.00
|
|
MTD to be deducted
|
Nil
|
(110.00 - 140.00)
|
The excess zakat of RM30 in Example 2 above may be carried forward to be off-set against the MTD of a subsequent month. However, please note that such adjustments are permissible only within the same year. That means, zakat paid in year 2010 can be deducted only with MTD to be deducted in year 2010 (current year).
If an employee makes tithes (zakat) payment other than the monthly zakat deduction, the employee may only re-adjust their MTD by using the Computerised Calculation Method by submitting the TP1 Form to their employer, subject to the employers approval.
- Computerised Calculation Method
If the payment for zakat to religious authority was made through salary deduction, employer needs to input the zakat amount in to the system in order for system to auto generate computation for MTD deduction.
However, if employee make zakat payment beside of monthly zakat deduction through salary, employee is allow to submit formTP1 subjected to employer approval to recomputed actual MTD amount.
- Additional Remuneration MTD computation for year 2009 onward.
There are two methods of formula for additional remuneration
Additional Remuneration MTD computation based on Schedule of Monthly Tax Deductions
Formula for additional Remuneration MTD computation as per PCB Notes or below is for employer who does not use computerised payroll software or proses payroll manually. How ever, IRBM is encourage empoyer to use 'Kalkulator PCB' or 'e-PCB' system/application developed by the IRBM.
Step 1 – Determine MTD on net normal remuneration for a year (not including current month additional remuneration) and MTD for additional remuneration which has been paid.
[A] Determine category of employee.
[B] Determine net normal remuneration = Gross normal remuneration less (-) EPF or any other Approved Scheme (limited to RM500.00 per month or RM6,000.00 per year).
[C] Determine current month MTD for net normal remuneration in Step 1 [B].
MTD for current month = RMXXX [refer to Schedule of Monthly Tax Deductions]
Net MTD = MTD for current month – zakat and fee/levy for current month
[D] Total MTD for a year = Total paid accumulated MTD + [MTD for current month at Step [C] x remaining month in a year include current month]
= X + [MTD for current month at Step [C] x (n + 1)]
Step 2 – Determine chargeable income for a year [P] (including additional remuneration for current month) and MTD for additional remuneration which has been paid.
[A] Determine category of employee.
[B] Determine chargeable income for a year [P];
P = [( Y – K ) x 12] + [S(Yt1 – Kt1)] + (Yt – Kt) – ( D + S + 1000C)
Step 3 – Determine total tax for a year based on value of P in Step 2 [B]. Value of M, R and B are based on value as per Schedule 1 above.
Total tax for a year = (P – M) x R + B
Step 4 – Determine MTD for current month additional remuneration where total tax (Step 3) less total MTD for a year (Step 1[D]) and zakat which has been paid.
MTD for additional remuneration = Step 3 – [Step 1[D]+ zakat which has been paid]
Step 5 – MTD for current month which shall be paid.
= Net MTD + MTD for current month on additional remuneration = Step 1[C] + Step 4
| Schedule 1: Value of P, M, R and B |
|---|
P
(RM) |
M
(RM) |
R
(%) |
B
Category 1 & 3 (RM) |
B
Category 2 (RM) |
|---|
| 2,500 – 5,000 | 2,500 | 1 | – 400 | – 800 |
| 5,001 – 20,000 | 5,000 | 3 | – 375 | – 775 |
| 20,001 - 35,000 | 20,000 | 7 | 75 | – 325 |
| 35,001 - 50,000 | 35,000 | 12 | 1,525 | 1,525 |
| 50,001 - 70,000 | 50,000 | 19 | 3,325 | 3,325 |
| 70,001 - 100,000 | 70,000 | 24 | 7,125 | 7,125 |
| Above 100,000 | 100,000 | 26 | 14,325 | 14,325 |
- MTD Calculation Formula For Computerised Calculation Method
Computerised Calculation Method is applicable in any of the following circumstances:
Employer who use the system/application developed by the IRBM which can be obtained from the IRBM website.
- Employer who use the computerised payroll system provided by the software provider or developed/customised by the employer in accordance with specifications determined and reviewed by the LHDNM.
- Employer who use the system/application developed by the IRBM which can be obtained from the IRBM website.
Employer needs to input related information in the system above mentioned if employer apply above method for MTD computation.
Formula for additional remuneration computerised calculation method is as below:
Step 1 – Determine MTD on net remuneration for a year (not including current month’s additional remuneration).
A] Determine category of employee.
[B] Determine chargeable income for a year [P];
P = [S(Y– K*)+(Y1 – K1*)+[(Y2 – K2*) x n]+(Yt – Kt*)] – [D+S+1000C + (SLP + LP1)] where (Yt – Kt ) = 0
[C] Determine monthly MTD for net normal remuneration. Once value of P in Step [B] is determined, value of M, R and B are determined based on Schedule 1 above.
MTD for current month = [ (P – M) x R + B ] – (Z+ X ) n + 1
Net MTD = MTD for current month – zakat and fee/levy for current month.
[D] Determine total MTD for a year
Total MTD for a year = Total paid accumulated MTD + [MTD for current month at Step [C] x remaining month in a year include current month]
= X + [(MTD for current month at Step [C] x (n + 1)]
Step 2 – Determine chargeable income for a year [P] (including additional remuneration for current month) and additional remuneration which has been paid.
[A] Determine category of employee.
[B] Determine chargeable income for a year [P];
P = [S(Y–K*)+ (Y1 – K1*)+[(Y2 – K2*) x n]+(Yt – Kt*)] – [D+S+1000C + (SLP + LP1)]
Step 3 – Determine total tax for a year based on value of P in Step 2 [B]. Value of M, R and B are based on value as per Schedule 1 above.
Total tax for a year = (P – M) x R + B
Step 4 - Determine MTD for current month additional remuneration where total tax (Step 3) less total MTD for a year (Step 1[D]), zakat and fee/levy which have been paid.
MTD for additional remuneration = Step 3 – [Step 1[D] + zakat and fee/levy which has been paid]
Step 5 – MTD for current month which shall be paid.
= Net MTD + MTD for current month on additional remuneration
= Step 1[C] + Step 4
- Scenario for bonus and director’s fee payment and how to compute the MTD for Year 2009 onward:
Year 2009 onward, director’s fee or bonus is receivable in respect of the whole or parts of the relevant period, the fee or bonus when receive in relevant period shall be treated as gross income in the year of receipt. MTD payments for additional remuneration bonus, director's fee and current month remuneration should pay under one CP39 form only as a single payment.
However, if there is arrears payment prior to previous year (other than bonus and directors's fee) pay in current year, for additional remuneration for prior years before year 2009 which is received in the current year, MTD calculation shall be calculated by using Bonus Formula and Schedule of MTD for the relevant year.
Scenario 1:
Additional remuneration for 2008 to be paid in year 2009.
- Use STD Schedule (Amendment 2004).
- Remuneration in December 2007 will be taken as a basis for computation of STD for Step [A] Bonus Formula.
- Use a separate form when making MTD payment for current month remuneration and additional remuneration.
- Form CP39A for additional remuneration MTD.
- Form CP39 (Pin. 2/05) for current month STD.
Scenario 2:
Additional remuneration for arrears commissions 2009 to be paid in year 2010.
- Use formula computerised calculation method MTD 2009/ Kalkulator PCB 2009.
- Select MTD computation for 2009.
- Select previously employed in current year.
- Click Month of December.
- Input total of accumulated remuneration/MTD/Rebate/Deduction until before current month for current year (including from previous employer) paid from January until December 2009.
- Please leave the current month remuneration as nil and input arrears commissions as current month remuneration including EPF (if any), click calculate.
- Please use Form CP39A for MTD additional remuneratin payment of arrears commissions.
- Example of calculation
Year 2008, En Ali received arrears salary of RM 1,200 (EPF : RM132.00). His salary in December 2008 is RM3,600 (EPF : 396.00). In January 2010, his salary increase to RM 3,700 (EPF : RM407.00). On the same month, he receives a bonus amounting to RM3,700 (EPF deduction : RM407).COmpute PCB Januari for En. Ali.
- Arrears salary MTD year 2008 (RM1,200)
Computation :
MTD Category : CATEGORY 3/KA2
[A] Determine the MTD on monthly remuneration (not including additional remuneration).
Monthly remuneration
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RM3,600.00
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Less : EPF
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RM 396.00
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Net remuneration
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RM3,204.00
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MTD on RM3,204 = RM48.00 [Refer MTD Schedule 2004].
[B] (1/12 X Nett Bonus) + Monthly net remuneration
Total Bonus
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RM1,200.00
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Less : EPF*
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RM 104.00
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Net Bonus
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RM1,096.00
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*Deduction for EPF is limited to RM500 per month. [RM500 - RM396.00 = RM104.00].
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(1/12 X RM1,096.00) + RM3,204.00 = RM3,295.00
[C] Determine the MTD on [B].
MTD on RM3,295.00 = RM50.00
[D] Determine the MTD on additional remuneration.
(RM50.00 – RM48.00) X 12 = RM24.00
[E] Total amount of MTD to be deducted in the month that arrears salary paid will be
= RM24.00 (use Form CP39A)
- MTD for bonus year 2010.
Please click here to view the detail of 'Kalkulator PCB' calculation.
* Use Form CP 39 for January MTD of RM 292.30.
MTD for Gratuities
Gratuity the following cases are fully exempted and computation for STD is not required:-
- Retirement gratuity
Sum received by way of gratuity on retirement from an employment-
- if the Director General is satisfied that the retirement is due to ill-health;
- if the retirement takes place on or after reaching the age of 55 years, or on reaching the compulsory age of retirement from employment specified under any written law and in either case from an employment which has lasted ten (10) years with the same employer or companies in the same group; or
- if the retirement takes place on reaching the compulsory age of retirement pursuant to a contract of employment or collective agreement at the age of 50 but before 55 and that employment has lasted for ten (10) years with the same employer or with companies in the same group.
- Sum received by way of gratuity or by way of payment in lieu of leave paid out of public funds on retirement from an employment under any written law.
- Sums received by way of gratuity paid out of public funds on termination of a contract of employment (less the employer's contribution to the EPF, if any, and interest thereon).
- Sum received by way of death gratuities or as consolidated compensation for death or injuries.
If an employee is not qualified to any exemption from gratuity as the above, MTD on all gratuities shall be calculated by using Additional Remuneration Formula.
Example :
- Employee commenced employment on: 1 January 2002
- Employee retired and received gratuity on: 29 October 2010
- Total gratuity paid upon retirement at the age of 53: RM35,000.00
Determine period of employment:
Period of employment: 1 January 2002 – 31 October 2010 (9 years 10 months).
Therefore, gratuity is taxable due to period of employment is less than ten (10) years.
Total gratuity received of RM35,000.00 is subject to MTD and the MTD shall be calculated using Additional Remuneration Formula.
Compensation for Loss of Employment
Compensation is exempted from income tax in the following circumstances:
- If the Director General is satisfied that the payment is made on account of loss of employment due to ill-health; or
- In case of a payment made in connection with a period of employment with the same employer or with companies in the same group, in respect of so much of the payment as does not exceed an amount ascertained by multiplying the sum of RM10,000.00 by the number of completed years of service with that employer or those companies.
Compensation for the purpose of this paragraph includes termination under the Voluntary Separation Scheme (VSS) or Mutual Separation Scheme.
Balance of compensation after deducting the qualifying exemption will be subject to MTD and the MTD shall be calculated using Additional Remuneration Formula.
Example:
- Employee commenced employment on 1 May 2004
- Employee is terminated on 25 March 2010
- Total compensation paid RM75,000.00
Determination of amount of compensation which is subject to tax.
[A] Determine the number of completed years of service.
1/5/2004 - 30/4/2005: one completed year of service.
1/5/2005 - 30/4/2006: one completed year of service.
1/5/2006 - 30/4/2007: one completed year of service.
1/5/2007 - 30/4/2008: one completed year of service.
1/5/2008 - 30/4/2009: one completed year of service.
1/5/2009 - 25/3/2010: less than one completed year of service.
Employee has served for 5 completed years of service.
[B] Tax exemption on compensation shall be:RM10,000.00 x 5 completed years of service = RM50,000.00
Compensation paid RM75,000.00
Less: Amount of exemption RM50,000.00
Balance of compensation subject to MTD RM25,000.00
Balance of compensation of RM25,000.00 after deducting the qualifying exemption will be subject to MTD and the MTD shall be calculated using Additional Remuneration Formula.
However, payment for compensation made by a controlled company to a director of the company who is not a whole-time service director shall not be exempted from tax.
MTD for Employee Share Option Scheme (ESOS)
Amount of share benefits is calculated as follows:
| Market value of share at the date option is exercisable | xx |
or
Market value at the date option is exercised
(whichever is lower) | xx |
Less:
| Price paid for the share ( if applicable) | xx |
| Perquisite under paragraph 13(1)(a) Act | xx |
Example :
Date option is offered : 1 December 2007
Date of option is exercisable : 1 March 2008 - 28 February 2018
Date of option is exercised : 2 May 2010
Market value per share at the date option is exercisable (1 March 2008) : RM3.80
Market value per share at the date option is exercised (2 May 2010) : RM4.00
Less:
Offered price per share on
1 December 2007 : RM1.50
Therefore, value of perquisite : RM2.30 (RM3.80 – RM1.50)
If employee being offered and exercised 10,000 unit of shares in the year 2010, the value of perquisite is:
10,000 unit of shares x RM2.30 = RM23,000.00
If the share option exercised by the employee is received in the form of cash and not shares, tax will be imposed on the date the option is exercised.
Employer must ensure MTD for the above perquisite is calculated based on the Additional Remuneration Formula in the month the perquisite is received.
MTD for Commissions
Calculation of MTD for all type of commissions must use additional remuneration MTD formula, nevertheless the commission is received at a fixed amount on each month. (The value of the commission does not need to be equal for every month).
MTD for Employees Working in a Branch outside Malaysia
An employee who is sent by a Malaysian Company to work outside Malaysia will be subject to Malaysian tax if:
- the employee is present in the other country for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned; and
- perform their duties in that country on behalf of the Malaysian Company; and
- the remuneration is borne by a Malaysian Company which has no permanent establishment in that Country.
If the employee fulfills the above mentioned conditions, his remuneration is still subject to tax in Malaysia. Every month, the employer must make a Monthly Tax Deduction for that employee.
Double Tax Agreements can also be referred to determine whether or not the employee is subject to Malaysian tax. If he is not subject to Malaysian tax, no MTD deduction should be made by the employer.
MTD Computation For Bonus and Director's Remuneration
Year 2009 onward, with reference to new Act Para 25 (2A) of Income Tax Act 1967, director’s fee or bonus is receivable in respect of the whole or parts of the relevant period, the fee or bonus when receive in relevant period shall be treated as gross income in the year of receipt.
Methods of MTD Payment By Employer
The Inland Revenue Board Of Malaysia offers several mediums of payment for employers to pay the Monthly Tax Deduction (MTD). The employer can make payment through the electronic medium by using Thumdrive, cd or diskette or by using e-payment facility. The employer can also pay manually by using Form CP39 or CP39A.
Payment at IRBM Payment Counter
- Submitting form CP 39 or CP 39A manually.
Payment at IRBM's payment counter can be made by filling in and submitting Form CP39 (amended 1/08) or CP39A(pin.2010). Photostat copies, computer generated forms or Form CP39 other than Form CP39 (amended 1/08) are also acceptable.
- Submitting data text file CP 39 or CP 39A through electronic medium together with form 39 or CP39A or confirmation receipt of data text file CP 39 or CP 39A through e-PCB or e-Data PCB.
Payment can only be made manually through electronic medium together with form 39 or CP39A at the Collection Branch payment counters in Kuala Lumpur, Kota Kinabalu and Kuching only.
Payment can only be made by submitting of confirmation receipt of data text file CP 39 or CP 39A through e-PCB or e-Data PCB at electronic medium payment counters at 1st Floor(left wing), Kuala Lumpur Collection Department only.
Payment At Counter Bank Using Diskette
MTD payment can be made at all the branches of CIMB Bank dan Public Bank Berhad (PBB). Format of data text file must comply with format data CP 39 specification by IRBM. Text file must only be save in a diskette for payment purpose.
An employer who is using a diskette for the first time is encourage to send a sample ofdata CP 39 format in diskette for testing together with a hardcopy of the list of MTD deductions. If successful, an approval letter will be issued and if unsuccessful, a rejection letter and report will be issued.
Among the advantages of making payment using a diskette at the counter bank are that the employer can make MTD payments at all CIMB/PBB branches in Malaysia, the employer need not send the payment, report and diskette to the Collections Branch in Kuala Lumpur and it enables the employer to easily make payment within the stipulated time.
Steps to follow when making MTD payment at the counter bank:
- The employer brings the diskette and cheque to the bank.
- Fills in Scheduler Tax Deduction Payment Slip.
- Takes the diskette for testing to the diskette testing counter.
- If successful, the employer takes the bank slip, diskette and cheque to the payment counter. A copy of the payment slip is given to the employer once payment is accepted by the bank.
- Employer shall keep copy of bank deposit slip for MTD payments deem as officer receipt.
MTD Payment
MTD Payment Through Internet
MTD payment can be made either through FPX (members of FPX) medium or direct log on to respective bank internet banking.
- Alliance Bank
- CIMB Bank
- Maybank
- Public Bank Berhad
- RHB Bank Berhad
- OCBC Bank
- Ambank Berhad
- Citibank Berhad
- HSBC Bank Berhad
- Hong Leong Bank Berhad
MTD on line payment for e-PCB and e-Data PCB users only can be made through FPX (members of FPX) medium by log on to e-PCB or e-Data PCB website, members of FPX bank as below:
- Bank Islam Malaysia Berhad
- CIMB Bank (Akaun B2B sahaja)
- Hong Leong Bank Berhad
- Maybank2e / Maybank2U
- Public Bank Berhad
Penalty for Late Remittance of MTD
An employer who fails to remit payment on or before the 10th of the following month can be fined. The minimum fine is RM200 and not more than RM2000 or 6 months imprisonment or both.
An employer who does not deduct MTD or deducts but fails to remit the MTD to IRBM can be prosecuted in a civil court. With this, the MTD not deducted becomes a debt to the Government.
MTD Payment for Non Resident Employee
MTD of an employee who is not resident or not known to be resident in Malaysia shall be calculated at the rate of 26% of his remuneration for year 2010.
Example :
Employee is not resident in calendar year 2010.
Total monthly remuneration : RM3,000.00
MTD calculation : RM3,000.00 x 26%
Total MTD : RM780.00
Request for Copy of Receipt
Employers who have made MTD payment at the IRBM payment counter but have lost the original receipt can request for a copy of the receipt from the IRBM payment counter in Jalan Duta.
Issues Relating To Employees
Yearly Remuneration Statement (EA/EC Form)
Refer to Section 83(1A), Income Tax Act 1967, with effect from year of assessment 2009, every employer shall, for each year, prepare and render to his employee statement of remuneration of that employee on or before the last day of February in the year immediately following the first mentioned year.
Forms to be used:
- 'EA' - Remuneration Statement for Private Employees.
- 'EC' - Remuneration Statement for Government Employees.
The above mentioned form will be attached together with Form E which is posted to you. In case if you do not receive it, Form EA/EC can be downloaded here.
Form EA or EC is not required to be sent to IRBM.
Notification of New Employee
The employer must notify the nearest assessment branch within one month from the date of commencement of employment of an individual who is subject to or may subject to income tax using Form CP22.
Failure to notify IRBM will render an employer liable to prosecution and on conviction, liable to a fine of not less than RM200 and not more than RM2,000 or to imprisonment for a term not exceeding six months or to both.
The employer also be responsible for any tax due from the above mentioned employee.
Retire or Cease From Employment
The employer is responsible for notifying IRBM at least thirty days before the date the employee ceases employment if:
- Employee is about to retire.
- Employee is subject to MTD scheme and the employer has not made any deduction.
- Employee is about to leave Malaysia permanently.
The employer must withhold money payable to the employee until they receive a Clearance Letter from the Assessment Branch.
However, the employer is not required to send notification about the employee ceasing employment or withhold money payable to him if:
- Employee is subject to MTD and deduction has been made by the employer.
- Employee's remuneration is less than the minimum income subject to MTD.
- Employer is aware that the employee is to be employed elsewhere in Malaysia.
Form used:
- CP22A - Notification of cessation of employment (Employment of Private Sector Employees)
- CP22B - Notification of cessation of employment (Employment of Public Sector Employees)
Failure to notify IRBM will render an employer liable to prosecution and on conviction, liable to a fine of not less than RM200 and not more than RM2,000 or to imprisonment for a term not exceeding six months or to both.
The employer will also be responsible for any tax due from the above mentioned employee.
The MTD amount is ascertained based on the following criteria:
Employee’s Residence Status
The residence status of an individual is determined under section 7 of the Act. Public servant or officer of a statutory authority who are nonresident by virtue of:
- exercising his employment outside Malaysia; or
- attending any course of study in any institution or professional body outside Malaysia which is fully-sponsored by the employer,
is deemed to be a resident for the basis year for that particular year of assessment and for any subsequent basis years when he is not in Malaysia.
Income from sources outside Malaysia received by persons in (a) or (b) above is exempted from income tax in Malaysia according to the Act.
- Non Resident Employee
MTD of an employee who is not resident or not known to be resident in Malaysia shall be calculated at the rate of 26% of his remuneration.
Example :
Employee is not resident in calendar year 2010.
Total monthly remuneration : RM3,000.00
MTD calculation : RM3,000.00 x 26% Total MTD : RM780.00
- Resident Employee
MTD of an employee who is resident or known to be resident in Malaysia is derived after deducting all allowable deductions under the Act.
Amendment on Monthly MTD
An employee can request his employer to increase his existing MTD deduction without getting approval from IRBM if the deduction made is not sufficient to cover the actual tax payable.
Employee Not Eligible for MTD but Liable to Tax
An employee whose monthly remuneration after EPF deduction is below RM2,451 may be liable to income tax even though his remuneration is not subject to tax deduction under the MTD.
It is the responsibility of the employer to inform the nearest IRBM office to have a file registered for that employee by filling up form CP22. The form can be downloaded here.
The employee is also responsible to register an income tax file if his employer fails to do so.
Beginning from the year of assessment 2009, director fees or bonus relating to a year which is received in any current year, that remuneration becomes part of remuneration in the current year it is received. Use Form CP39 only (Pin. 2/05) for current month MTD payment.
For additional remuneration (other than bonus and director’s fee) for prior years before year 2009 which is received in the current year, MTD calculation shall be calculated by using Bonus Formula and Schedule of Monthly Tax Deduction for the relevant year.
Example 1:
Additional remuneration of arrears commission for 2008 to be paid in year 2009.
- Use STD Schedule (Amendment 2004).
- Remuneration in December 2008 will be taken as a basis for computation of MTD for Step [A] Bonus Formula.
- Use a separate form when making MTD payment for current month remuneration and additional remuneration.
- Form CP39A for additional remuneration MTD.
- Form CP39 for current month MTD.
Example 2:
Additional remuneration of arrears commission for 2009 to be paid in year 2010.
- Use formula computerised calculation method MTD 2009/’Kalkulator 2009’.
- Click MTD calculation year 2009.
- Select previously employed in current year.
- Click Month of December.
- Accumulated remuneration/MTD/Rebate/Deduction until before current month for current year (including from previous employer)
- Do not input the current remuneration and just key in amount of arrears received as additional remuneration as well as EPF (if any). Clicks calculate.
- Use Form CP39A to pay MTD for additional remuneration(arrears commissions).
If additional remuneration for the year 2009 is paid in the current year, the MTD calculation is as follows;
- Schedule of Monthly Tax Deduction for year 2009
The MTD calculation for Step 1 in the Additional Remuneration Formula shall be based on the normal remuneration for the month of December or last month of employment for the year by using the Schedule of Monthly Tax Deductions applicable for that year.
- Computerised Calculation Method
The MTD calculation shall take into account the total remuneration, deductions, rebate and MTD for year 2009.
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