MALAYSIAN PAYROLL STATUTORY Overview

Malaysian Statutory OUTLINE 02 1.Monthly Tax Deduction 2.Social Security Organization 3.Employee Provident Plan 4.Zakat 5.Other Levies

INLAND REVENUE BOARD of Malaysia (IRBM) Lembaga Hasil Dalam Negeri Malaysia

INLAND REVENUE BOARD OF MALAYSIA OUTLINE 04 1.Overview 2.Classification of Remuneration 3.Remuneration Subject to Tax 4.Tax Rate 5.Classification of Employees 6.Deductions & Rebates 7.Tax Treatment for Severance Pay

05 Malaysia Statutory Income Tax Overview MY income tax is known as CP39 /Scheduled Tax Deduction (STD) /Potongan Cukai Berjadual (PCB)/ Monthly Tax Deduction (MTD) Monthly Tax Deduction (MTD) is deducted based on employee income on the current year and is also based on the following employee status: 1.) Single 2.) married with spouse not working/spouse working 3.) and number of children.

Malaysia Statutory Income Tax – Overview CP38 06 CP38 is a forced deduction arising from income tax balance from previous years. Issued by Inland Revenue Board of Malaysia to employer requiring them to make deductions of certain amounts for specified months. Will be paid on top of tax based on schedular tax deduction More details can be found on this website :

Inland Revenue Board of Malaysia CLASSIFICATION OF REMUNERATION 07 1.Normal Remuneration These are monthly fixed remuneration paid to an employee whether the amount is fixed or variable as stated in the employment contract, written or otherwise. Example: Salary / Wages Fixed Allowances 2.Additional Remuneration These are any payments paid to an employee either in one lump sum or periodical or in arrears or non-fixed payment or any additional payment to a currents month normal remuneration. Example: Overtime Commissions

08 Inland Revenue Board of Malaysia REMUNERATION SUBJECT TO TAX Salary Wages Overtime Payment Commission Tips

09 Inland Revenue Board of Malaysia REMUNERATION SUBJECT TO TAX Allowances Bonuses / Incentives Directors Fees Prerequisites EEs Share Option Scheme (ESOS)

10 Inland Revenue Board of Malaysia REMUNERATION SUBJECT TO TAX Tax borne by the ER Gratuity Compensation for loss of Employment Other Remuneration related to employment

11 Inland Revenue Board of Malaysia TAX RATE Non Resident Employee: MTD of an employee who is not resident in Malaysia shall be calculated at the rate of 26% of his remuneration. Example: EE not resident in Yr 2010 Total Monthly Remuneration=RM 3,000 Calculation =RM3,000 x 27% =RM810 MTD Resident Employee: MTD of an employee who is resident or known to be resident in Malaysia is derived after deducting all allowable deductions.

12 Inland Revenue Board of Malaysia DEDUCTIONS & REBATES 1.Individual Allowable Deduction of RM9,000 for an individual in respect of himself and his dependent relatives is granted automatically 2. Spouse Deduction of RM3,000 is given in respect of a husband or a wife living together in the basis year on condition that the husband or wife has no source of income/total income or has elected for joint assessment. 3. Child Deduction of RM1,000 for each unmarried child under the age of 18 yrs in a current yr Deduction of RM1,000 is also given for each unmarried child of 18 yrs and above who is receiving full-time education in a current year

13 Inland Revenue Board of Malaysia DEDUCTIONS & REBATES In circumstance where Employee has a child of 18 yrs or above and receiving full time education in a current year, deduction is to be given as if the EE has the following number of children: Child is over the age of 18 yrs and receiving full time instruction at diploma level onwards in an institution of higher education in Malaysia Child is over the age of 18 yrs and receiving full time instruction at degree level onwards in an institution of higher education outside Malaysia Disabled child as certified by the Department of Social Welfare Disabled child receiving further instruction at diploma level onwards in an institution of higher education in Malaysia or at degree level onwards in an institution of higher education outside Malaysia Additional DeductionsEquivalent Deductions

15 Inland Revenue Board of Malaysia TAX TREATMENT – SEVERANCE PAY If compensation received is due to ill health, it is exempted from tax If compensation is received is due to other cases: –exemption of RM10000 for every completed year of service with the same employer or with companies in the same group

Social Security Organization (SOCSO) Pertubuhan Keselamatan Sosial (PERKESO)

SOCSO Topic Outline 1. Overview 2. Definition of Wages 3. Types and Categories of Contribution 4. Contribution Schedule 5. Example 6. Borang forms

19 Malaysia Statutory Social Security Organization (SOCSO) Rules and Requirements The SOCSO coverage is only applicable for Malaysian citizens and PR.whether it is temporary, part-time, probationary or permanent in nature. If the person receives a monthly wage of RM3,000 or less, the person must compulsorily make monthly contributions to SOCSO. However, once the employee is eligible under the Act, the person will continue to be eligible even if her/his present wage exceeds. RM3,000 per month. This Principle is known as "Once In Always In" More details can be found on this website

Definition of Wages All remunerations payable in money to an employee is taken into account as wages for the purpose of SOCSO contributions. These include the following payments: - Salary - Overtime Payments - Commission - Payments for leave such as annual, sick and maternity leave, rest day, public holidays - Allowances such as incentive, good behavior, cost of living (COLA) - Service Charge 20

Definition of Wages The following payments are not considered as wages: -Payments from the employer to any pension or provident fund for the employees -Mileage claims -Gratuity for dismissal or retrenchment - Annual bonus 21

1. Employees who are below 55 years old. Both Employer and Employee contributes for SOCSO SOCSO/ PERKESO Types of contribution: 3. For an insured employee receiving an invalidity pension whose wage is less than 1/3 of the average monthly wage he is receiving before invalidity. Only the Employer contributes for SOCSO 2. Employees who are over 55 years old. Only the Employer contributes for SOCSO 22

SOCSO/ PERKESO Contribution The Principal employer must pay monthly contribution for each eligible employee based on the SOCSO Contribution Schedule. Both the rates of contribution are based on the total monthly wage paid to the employee. Contribution should be made from the first month the employee is employed. 23

Contribution Schedule 24

Example Salary = RM Overtime Payments = RM COLA = RM Total Remuneration = RM Contribution to be paid to SOCSO is Total Contribution = 1250 =RM (Refer Contribution Schedule). 25

Contribution Schedule 26

SOCSO BORANG 8A Borang 8A is a summary report for both Employer and Employees Contribution. The purpose of this form is to submit employee's monthly SOCSO contribution to PERKESO. 27 SOCSO Reports

SOCSO BORANG 2 This form is intended to register companys new employees to PERKESO 28 SOCSO Reports

SOCSO BORANG 3 This form is intended to notify PERKESO of the companys resigned employees 29 SOCSO Reports

EMPLOYEE PROVIDENT PLAN - Malaysia Kumpulan Wang Simpanan Pekerja (KWSP)

Employee Provident Plan OUTLINE 31 1.Overview 2.Payments Subject to EPF 3.Payments Not Subject to EPF 4.EPF Contribution Rates – A 5.EPF Computation Guide 6.Rules: Rounding 7.EPF Contribution Rates – B 8.EPF Computation Guide 9.Rules: Rounding

32 Malaysia Statutory Employee Provident Plan (KWSP) Rules and Requirements Membership to the EPF is mandatory for working Malaysian citizens, or non- Malaysian citizens who are either permanent residents or have been EPF members before 1 August, Can be withdrawn when member reaches 55 years old Payable every 15th of the next month More details can be found on this website

33 Payment of unutilized annual leave and medical leave Bonus Allowance Commission Arrears of wages Employee Provident Fund PAYMENTS SUBJECT TO EPF

34 Maternity leave pay Study leave pay Director's salary Other payments under a contract of service or otherwise Employee Provident Fund PAYMENTS SUBJECT TO EPF

35 Employee Provident Fund PAYMENTS NOT SUBJECT TO EPF Service charge Overtime payment Gratuity Director's Fees Retirement benefits Retrenchment, lay-off or termination benefits Any travelling allowance or the value of any travelling concession Any other remuneration or payment exempted by the Minister

36 Employee Provident Fund EPF CONTRIBUTION RATES - A employees who are Malaysian citizens, permanent residents (PRs), and non Malaysian employees who have elected to contribute before 1 August 1998 Payments amounting from RM.01 to 20,000, please refer to schedule Payments exceeding RM 20,000 rate is computed as follows EE = 8% ER = 12%

37 Employee Provident Fund EPF CONTRIBUTION RATES - A

38 Employee Provident Fund RULES: ROUNDING 5000 below-round up 10s 5000 up-round up 100s Note: Kindly refer table above.

39 Employee Provident Fund SAMPLE EPF COMPUTATION For Ronald Liew Hoo Chee EE EPF= round up to ER EPF = x 12% = x 8%= = For Mohamad Fauzien Omar EE EPF= round up to ER EPF= x 12% = x 8%= =

40 Employee Provident Fund SAMPLE EPF COMPUTATION Example: Mae Lim is a Malaysian earning RM 23,475 Compute EPF : 1.) EE EPF = ) Round to the nearest 100 = ) EE EPF = x 8% 4.) EE EPF = ) ER EPF = x 12% 6.) ER EPF = 2820

41 Employee Provident Fund EPF CONTRIBUTION RATES - B Non Malaysian citizens employees who have elected to contribute after August 1998 Payments amounting from RM.01 to 20,000, please refer to schedule Payments exceeding RM 20,000 rate is computed as follows EE = 8% ER = RM 5.00

42 Employee Provident Fund EPF CONTRIBUTION RATES - B

ZAKAT & OTHER LEVIES - Malaysia

44 Malaysia Statutory Zakat ZAKAT is only applicable to Muslim employee. Employee has an option to choose to pay monthly income tax or to contribute the tax amount to Zakat in a particular month. If the Zakat contributed is lesser than the monthly tax deduction, the employer may set-off those payments against the amount of tax to be deducted for the respective month. More details can be found on this website Rules and Requirements

Malaysian Statutory OUTLINE- 4 Levies 45 1.) Tabung Hajji 2.) Amanah Saham Bumiputera (ASB) 3.) Human Resource Development Fund 4.) National Union Bank of Employee (NUBE) These levies are not compulsory for employers

46 Malaysia Statutory Other Levies – Tabung Hajji This is applicable to Muslim employees only It is an optional for employees to contribute in a savings plan for them to perform hajj (Muslim religion) employee has to fill up the form to authorize his employer to impose pay-cut. Minimum of RM 10 monthly deduction. Rules and Requirements More details can be found on this website

Malaysia Statutory Other Levies – Amanah Saham Bumiputera (ASB) This is an investment scheme like savings for Muslim employees 47 HR Development Fund This is an investment scheme like savings for all employees National Union Bank of Employee (NUBE) an optional contribution for workers in the finance and banking industry in Malaysia More details can be found on this website More details can be found on this website More details can be found on this website

Malaysia Statutory SUMMARY 48

49 CITIZENSHIP EPF Rates EEER Residents8%12 Non-residents8%RM 5.00 Malaysia Statutory SUMMARY

50 LEVIES ZakatHajHRDASBNUDE Muslimsxxxxx Non-muslims--x-x Malaysia Statutory SUMMARY

Potongan Cukai Berjadual PCB Calculator

52 Inland Revenue Board of Malaysia PCB CALCULATOR EE Name IC No Month of Tax Tick which is applicable EE Status Tick which is applicable No of Child/Children

53 Inland Revenue Board of Malaysia PCB CALCULATOR Accumulated Gross Wages (CP39) Accumulated EPF (CP8A) Accumulated MTD (CP39) Accumulated Zakat (CP39)

54 Inland Revenue Board of Malaysia PCB CALCULATOR Current Months Remuneration Current Months EPF

55 Inland Revenue Board of Malaysia PCB CALCULATOR Fill up if applicable EPF for additional Remuneration

56 Inland Revenue Board of Malaysia PCB CALCULATOR Current Months Zakat Deduction Click to Submit