Employment Tax
Malaysia | Exploring the latest monthly tax deduction guidelines
Summary
The Malaysian Inland Revenue Board (MIRB) recently released the updated Monthly Tax Deduction Guideline Income Tax (Deduction from Remuneration) Amendment 2024 on their official website. The aim of the updated guidelines is to summarise the employer’s obligation in relation to the application of Monthly Tax Deduction (MTD) on their employees’ monthly remuneration and to assist employers in calculating MTD accurately in accordance with the Income Tax (Deduction from Remuneration) Rules 1994 and other relevant laws effective on the publication date of this guideline.
The Detail
In accordance with Section 107 of the Income Tax Act, 1967 and the Income Tax (Deduction from Remuneration) Rules of 1994, employers are obligated to deduct MTD from their employees’ monthly remuneration with the specified method of calculation as directed by the Director General of the Inland Revenue Board and remit it to the Malaysian tax authorities by the 15th day of the subsequent month. Failure to comply may result in a penalty ranging from RM200 to RM20,000 or imprisonment for a period not exceeding six months, or both.
The guideline outlines the salient features in determining the amount of MTD as follows:
| No. | Salient Features | Details | Example |
| 1 | General conditions | · The minimum MTD is set at RM10 | |
| · Employers are exempt from deducting MTD if the calculated amount, prior to zakat deduction, falls below RM10. | |||
| · MTD amounts must be restricted to two decimal points | |||
| · MTD amounts must be rounded up or down to nearest five cents | |||
| 2 | Method of determining MTD amount | Computerised calculations | · e-PCB |
| · e-CP39 | |||
| · PCB Calculator | |||
| · Software provider or developed by employer which complied with MTD specifications | |||
| MTD scheduler | For employers who do not use computerised calculations | ||
| 3 | Criteria of employee | Residence status in Malaysia (to be determine the applicable tax rate) | · Tax resident |
| · Non-tax resident | |||
| Employee category | · Category 1: Single | ||
| · Category 2: Married with spouse does not work | |||
| · Category 3: Married with spouse working, divorced or death of spouse or single with adopted children | |||
| Types of employment income | · Cash remuneration | ||
| · Benefits-in-kind | |||
| · Value of living accommodation | |||
| · Payments from unapproved pension fund | |||
| · Compensation for loss of employment | |||
| · Gratuity | |||
| · Other payments and benefits in kind | |||
| Remuneration category | · Normal remuneration | ||
| · Additional remuneration | |||
| 4 | Reliefs claim, allowable deductions and rebates | Mandatory deductions | · Self relief |
| · Spouse relief | |||
| · Child relief | |||
| · EPF and SOCSO relief | |||
| Additional deductions | Deductions for: | ||
| · Persons with disabilities | |||
| · Spouse with disabilities | |||
| · Children with disabilities | |||
| Optional deductions | Reliefs and deductions allowed under the Income tax Act, 1967 as specified under Form TP1 to be submitted to the employer. | ||
| Rebates | · Zakat rebate | ||
| · Rebate for departure levy | |||
| 5 | Formula for MTD calculation | Different calculation formulas are applicable to different categories which are: | |
| · Calculation using MTD scheduler | |||
| · Calculation using computerised calculations | |||
| · Computerised calculations for the Expert Return Program | |||
| · Computerised calculations for knowledge workers in the specified region | |||
| · Computerised calculations for non-resident individuals holding C-Suite positions in an approved company | |||
Considering the significant features outlined above, it is apparent that employers must carefully consider numerous factors to compute the MTD precisely for their employees. In addition to the above, employers are also required to be mindful of the following obligations:
How we can help
Vialto Partners can assist you in ensuring MTD is complied with and computed correctly for all their employees and deemed employees, therefore minimising the risk of penalties or a payroll audit by the MIRB.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Hilda Liow
Partner
Lim Phing Phing
Partner
Wee Lay Har
Director
Huang I-Hsiang
Senior Manager
Further information on Vialto Partners can be found here: www.vialtopartners.com
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Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
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Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
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