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)