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MTD computation for additional remuneration year 2008 and before

  1. 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:

  1. Determine the tax deduction on monthly remuneration (not including additional remuneration).
  2. (1/12 X Nett Bonus) + Monthly net remuneration.
  3. Determine the tax deduction on [B].
  4. Determine the tax deduction on additional remuneration.
  5. 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 month remuneration for the respective year and by using the respective MTD schedule for that year as follows:

  1. Use MTD Schedule (Amendment 2004).
  2. Current month remuneration 2008 will be taken as a basis to compute MTD for step [A] Bonus Formula.
  3. MTD payment for additional and monthly remuneration must be combined together and need not be separated.
  4. Use Form CP39 to make payment.Only submit 1 form CP39 for MTD current month.

Scenario 2: Year 2007 additional remuneration paid in 2008

An 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:

    1. Use MTD Schedule (Amendment 2004).
    2. Remuneration in December 2007 will be taken as a basis for computation of MTD for step [A] Bonus Formula.
    3. Use a separate form when making MTD payment for current month remuneration and additional remuneration.
    4. Form CP39A for additional remuneration MTD.
    5. Form CP39 for current month MTD.

  1. 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.

  2. 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:

  1. overtime allowance
  2. bonus/incentive
  3. arrears of salary or any other arrears paid to an employee
  4. employee's share option scheme (if employee opts for MTD deduction)
  5. tax borne by employer
  6. gratuity
  7. compensation for loss of employment
  8. ex-gratia
  9. director`s fee (not paid monthly)
  10. commissions
  11. allowances (variable amount either paid every month or not )
  12. any other payment in addition to normal remuneration for current month

Types of Remuneration Subject to MTD

  1. salary
  1. director fees
  1. wages
  1. perquisite
  1. overtime payment
  1. employee's share option scheme (ESOS)
  1. commission
  1. tax borne by the employer
  1. tips
  1. gratuity
  1. allowance
  1. compensation for loss of employment
  1. bonus/ incentive
  1. 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.

    1. 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.

    1. 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

  1. 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.

  1. 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 form TP1 subjected to employer approval to recomputed actual MTD amount.

  1. Additional Remuneration MTD computation for year 2009 onward.

There are two methods of formula for additional remuneration

  1. 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
    1. 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.

      1. 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.

      2. 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:

    2. 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

  1. 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.

  1. Use STD Schedule (Amendment 2004).
  2. Remuneration in December 2007 will be taken as a basis for computation of STD for Step [A] Bonus Formula.
  3. Use a separate form when making MTD payment for current month remuneration and additional remuneration.
  4. Form CP39A for additional remuneration MTD.
  5. Form CP39 (Pin. 2/05) for current month STD.

Scenario 2:

Additional remuneration for arrears commissions 2009 to be paid in year 2010.

  1. Use formula computerised calculation method MTD 2009/ Kalkulator PCB 2009.
  2. Select MTD computation for 2009.
  3. Select previously employed in current year.
  4. Click Month of December.
  5. 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.
  6. Please leave the current month remuneration as nil and input arrears commissions as current month remuneration including EPF (if any), click calculate.
  7. Please use Form CP39A for MTD additional remuneratin payment of arrears commissions.
  1. 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.
  1. Arrears salary MTD year 2008 (RM1,200)

  2. 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)

  1. 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:-

  1. Retirement gratuity

Sum received by way of gratuity on retirement from an employment-

  1. if the Director General is satisfied that the retirement is due to ill-health;
  2. 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
  3. 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.
  1. 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.

  2. 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).

  3. 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 :

  1. Employee commenced employment on: 1 January 2002
  2. Employee retired and received gratuity on: 29 October 2010
  3. 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:

  1. If the Director General is satisfied that the payment is made on account of loss of employment due to ill-health; or

  2. 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:

  1. Employee commenced employment on 1 May 2004
  2. Employee is terminated on 25 March 2010
  3. 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.
Hit(s) : 118,612
Updated : : 2015-01-06 10:42:36

.Inland Revenue Board Of Malaysia, Menara Hasil, Persiaran Rimba Permai, Cyber 8, 63000 Cyberjaya Selangor. 03-83138888 .

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