If you have just started using Talenox Malaysia, you'd want to ensure that the Monthly Tax Deduction (or Potongan Cukai Bulanan) for your employees is accurate.
Here are the steps to ensure that:
1. Under Employee Profile > Statutory Details > Setup accumulated deductions, do enter the Accumulated MTD paid (assuming from Jan - April 2019) to ensure that MTD calculation is correct from May 2019 onwards (for example):
2. Do ensure that all these fields are completed correctly in the fields provided for accurate PCB/MTD calculations:
Accumulated MTD paid**
Accumulated Remuneration/Benefit-In-Kind (BIK) / Value of Living** Accommodation (VOLA)**
Accumulated SOCSO (include EIS amount*)**
*From Year of Assessment 2022 onwards (link), SOCSO contributions be expanded to cover employee contributions through the Employment Insurance Scheme (EIS).
**Do note that "Setup accumulated deductions" (in employee profile) only needs to be populated for new employees who join your company mid-year (or at least from February onwards). This section can be skipped if your new hire joins the company on 1 January.
3. Once all 4 fields are saved, we will calculate the whole year's tax and prorate accordingly based on the official formula, which you can verify from LHDN Official Calculator (MTD Calculation) in Talenox. 😁
How to further verify accurate MTD calculation?
1. After processing payroll, in Month Total page, select any employee and "double- click" on the value amount under MTD column.
2. Thereafter, it will auto-verify with LHDN and a .pdf report will be generated from LHDN Official Calculator (MTD Calculation). This will take approximately 1 minute to simulate the user filling forms. (Do note that this will depend on the loading speed of LHDN website too.)
Here is an example of the auto-generated PCB/MTD .pdf report. (For a better experience, do ensure the browser pop-up blocker is disabled first.) 😎
Talenox calculates MTD/PCB based on a formula set by LHDN. As MTD/PCB calculation can be quite complex, here is the summarised formula below:
[(P-M) x R] + B / 12
P = Chargeable income for the year
M = Amount of the 1st chargeable income for every range of chargeable income a year
R = Percentage of Tax Rates
B = Amount of tax on M (less) tax rebate for individual and spouse (if qualified)
Taxable income: Previous salary + (recurring items in monthly salary + non recurring items in monthly salary) + (recurring items from this month’s salary x number of months remaining in the year)
Chargeable Income: Taxable income - deductions
Total Yearly Tax is calculated on the chargeable income
NOTE: Annualised predicted income for an employee has to be more than $40,000 RM for the system to calculate an employee's PCB/MTD amount in the system.
If the amount of Monthly Tax Deduction (MTD/PCB) is less than ten ringgit (< RM10), the employer is not required to make the Monthly Tax Deduction.
If the amount of Monthly Tax Deduction (MTD/PCB) is more than ten ringgit (> RM10), the employer is required to make the Monthly Tax Deduction.
(please download the official PCB pdf document from LHDN - refer to Page 18)
For a more in-depth look, check out our comprehensive breakdown of the topic of PCB/MTD (including calculations) on the Vox of Talenox.
Now, you can easily calculate your PCB/MTD amounts in payroll. ☺️