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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.
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