In 2009, Malaysia’s income tax moved to a Monthly Tax Deduction (MTD) or Potongan Jadual Bercukai (PCB). If you are earning on average less then 2,500MYR a month, you’re not required to file taxes.
Also as announced in Budget 2014, you can opt not to file taxes if you are already paying MTD/PCB. However, you most likely would want to claim as there are deductions and you can get tax cash refunds.With PCB, your estimated monthly tax payable amount is deducted from your salary. Your employer pays this amount to the Inland Revenue Board (LHDN) by the 10th of every month. When you file your taxes annually, you will fill up tax-related info including your accumulated PCB for the year. If you have paid more than required, you will get a refund. If you have paid less, you will need to pay the difference.
Taxes in Malaysia are progressive. A progressive tax is a tax where the tax rate increases as the taxable base amount increases.
The term “progressive” refers to the way the tax rate progresses from low to high, with the result that the average tax rate is less than the highest marginal tax rate. The taxable base amount is based on chargeable income. Salary and other remuneration less tax exemptions and tax relief.
Remuneration subject to PCB
Salary/Wages Overtime Pay Commission Tips Allowance Bonus/Incentives Director fees Perquisite (perks) Employee’s Share Option Scheme (ESOS) Tax borne by the employer Gratuity Compensation for loss of employment Other remuneration related to employment PCB allowable deductions
Deduction for individual – RM9,000 Deduction for husband or wife – 4,000 (if spouse not working) Deduction for child – RM2,000 per child (claimable only once per child if both parents working). For example, if both husband and wife are working and have three children. Husband, two children deduction and wife, one child deduction. Contribution to EPF or other approved scheme – RM6,000 Deduction for zakat (Muslims only) Bonus: Estimate after taxes
A rough estimate is that about 16% of your bonus would go into paying for taxes and 11% for EPF deductions.
Thus you would only take home about 73% of your bonus. For example, bonus RM10,000. Actual take home: RM7,300.
Bonus: Calculation after Taxes
For a more accurate calculation, there are two ways that PCB is calculated. Companies may use either method. And you can calculate it yourself as well to check that it tallies.
Computerised Calculation Method Schedule of Monthly Tax Deductions