1

MONTHLY

TAX

DEDUCTION

AS FINAL TAX EMPLOYERS’ & EMPLOYEES’ RESPONSIBILITIES

IMPLEMENTATION MTD

FINAL TAX

1) CONCEPT

2) MECHANISM

3) IMPLEMENTATION

4) AMENDMENTS TO ITA 1967

5) SUMMARY

An Overview Of Monthly Tax

Deduction As Final Tax -

Employers and Employees

Responsibilities

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1. Konsep

All employee with salary income

Tax payer have an option not to file in return form

Implementation in 2015 for 2014 MTD

MTD AS FINAL TAX

1. CONCEPT

CURRENT CONCEPT

MTD is an estimated tax that ease the burden of

taxpayer to pay lump sum when tax is calculated and

employee have to submit form BE on or before 30th

April.

NEW CONCEPT

Deduction is not an estimated tax but final whereby

taxpayer may elect not to furnish a return.

DEDUCTION OF TAX AS FINAL TAX Employee who may elect not to furnish a return :

a. Has income only in respect of gains or profits from

an employment

b. MTD have been made by his employer in respect

of such gains or profits

c. Working for twelve months in the basis period with

the same employer

d. Employees whose taxes are not borne by their

employers

e. Individuals not opted for joint/combined

assessment with the spouse

Employee who do not furnish return by the due date:

a. Is deemed to have made an election (MTD as final tax)

b. Total amount deducted shall be deemed to be

the amount of tax payable

c. no assessment shall be made by the DG

DEDUCTION OF TAX AS FINAL TAX

Eligible employees whose MTD have been

correctly deducted have an option from not

filing returns

Remuneration / Employment

Mandatory Deduction

Optional Deduction

Rebate

Remuneration from Employment

• Salary

• Overtime

• Commission

• Tips

• Allowance

• Bonus/incentive

• Director fees

• Perquisite

• Shares option scheme

• Tax borne by employer

• Gratuity

• Others pertaining to employment

Mandatory Deduction

• Individual

• Husband/wife

• Children

• EPF

• Disable person

• Disable Husband/wife

Rebate

• Individual

• Husband/wife

Optional Deduction

• Purchase of personal computer (once in every 3 years)

• Net saving in SSPN's scheme

• Life insurance

• Medical expenses for parents

• Basic supporting equipment

• Education Fees (Individual)

• Medical expenses for serious diseases

• Complete medical examination

• Purchase of books, journals, magazines and publications

• Purchase of sport equipment for sport activities

DEDUCTION OF TAX AS FINAL TAX

Scenario 1 If employee elect not to

submit TP1/TP2:

- Optional deduction are not deducted other

than the compulsory deduction allowable.

- Therefore, the MTD is not accurate (over

deducted) and there is refund cases.

- BIK and VOLA are not subject to

MTD.

- Therefore, the MTD is not

accurate (under deducted) and

there is outstanding tax

payable.

An employee:

- may make an

irrevocable election in

the prescribed form (TP1)

for optional deduction, and

- the BIK and VOLA as part

of his remuneration to be

subject to MTD by

completing the prescribed

form (TP2)

by submit the form to the

employer.

DEDUCTION OF TAX AS FINAL TAX

Scenario 2 If employers’

refuse to accept/ process

TP1/TP2 form:

- Optional deduction (TP1) are not

deducted other than the compulsory

deduction allowable,

- Therefore, the MTD is not accurate (over

deducted) and there is refund cases.

- BIK and VOLA (TP1) are not

subject to MTD,

- Therefore, the MTD is not accurate

(under deducted) and there is

outstanding tax payable.

- The optional deduction (TP1)

are deductions other than the

compulsory deduction

allowable to be claimed by the

employee, and

- the BIK and VOLA as part of

his remuneration to be subject

to MTD by completing the

prescribed form (TP2)

in determining the amount of

monthly MTD, subject to the

approval of his employer.

2. MECHANISM Using the same concept and current MTD system :

Computerised calculation method (Formula) and

MTD schedule.

TP1, TP2 and TP3 forms

To maintain TP forms in the implementation of MTD

final tax.

Determining MTD Final tax correct

and accurate

Computerised calculation

method

MTD Schedule manual

MTD

calculator in

IRBM

website

MTD Schedule

EMPLOYEE’S ROLE

Employees claim deductions via Form TP1.

Any under-payment of tax arising from insufficient or

wrong information provided to the employer will be

the responsibility of the employee.

EMPLOYER’S ROLE To ensure correct MTD is deducted from the

employees remuneration and have it remitted to the

IRBM

3. IMPLEMENTATION Responsibility of

employer and employee

a. Option not to file tax return

b. Filing of tax return

TP2/TP3 informing :

a. Personal info

b. Previous employer

a. Employee claim reliefs / deductions

b. Employer deduct from salary /

remuneration

a. EA : employee check amount

deducted.

b. Employer submit Form E to IRBM

4. AMENDMENTS TO ITA 1967

ITA 1967

a. Section 77C – Deduction of tax as final tax

MTD Rules

a. Range RM5

b. MTD schedule – minimum deduction RM1

Amendments to Income Tax Act 1967 / MTD Rules

IMPLICATIONS OF MTD FINAL TAX

Employee

Employer

IRBM

• MTD calculation towards final tax started from 2009

• Not a new issue

• Will not burden employer / employee

GUIDELINE / Q&A

Q&A available in the website

Current MTD system is in line with MTD final

tax which has been practised for 5 years

since 2009. This system will not burden

employer / employee.

5. SUMMARY

THANK YOU www.hasil.gov.my

1-800-88-5436 (LHDN)