Received your bonus or commission but wondering about the large deductions that are incurred? Find out how to calculate your Malaysian Bonus & Tax calculations.
History & Introduction
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 2,500 a month, you will not need to file taxes. Also as per 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 & you can get tax cash refunds.
How PCB works is that your estimated monthly tax payable amount is deducted from your salary. Your employer would pay this amount to Lembaga Hasil Dalam Negeri (LHDN) by the 10th of the month. When you file your taxes annually, you would fill up tax-related info including your accumulated PCB for the year. If you have paid more then required, you 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 & other remuneration less tax exemptions & tax relief.
Remuneration subject to PCB:
- Overtime Pay
- Director fees
- Perquisite (perks)
- Employee’s Share Option Scheme (ESOS)
- Tax borne by the Employer
- Compensation for loss of employment
- Other remuneration related to employment
PCB allowable deductions:
- Deduction for individual – 9,000
- Deduction for husband or wife – 3,000 (if spouse not working)
- Deduction for child – 1,000 per child (claimable only once per child if both parents working)
E.g. Both husband & wife working with 3 children. Husband 2 children deduction & wife 1 children deduction.
- Contribution to EPF or other approved scheme – 6,000
- Deduction for zakat (Muslims only)
Bonus – Estimate after Taxes
Moving on, how does the calculation for bonuses work?
A rough estimate is that about 16% of your bonus would go into paying for taxes & 11% for EPF deductions.
Thus you would only take home about 73% of your bonus.
E.g. Bonus 10,000. Actual take home: 7,300
Bonus – Calculation after Taxes
For a more accurate calculation, there are 2 ways that PCB is calculated. Companies may use either method. And you can calculate it yourself as well to check that it tallies.
1. List down your salary & bonus/other remuneration
2. Calculate your EPF & SOCSO deductions
Note: for EPF include salary + bonus, SOCSO is a fixed monthly amount
EPF (default) Employer: 12% | Employee: 11%
SOCSO (max at 3k above) Employer: 51.65 | Employee: 14.75
3A. Calculate using PCB Calculator
- Month: Current month | Marriage Status: Single / Married (spouse working / not working) | No of Children
- Accumulated Remuneration (until before current month): Monthly salary * Total months from Jan until last month
- Accumulated EPF (until before current month): Monthly EPF (Employee) deduction * Total months from Jan until last month
Note: If monthly EPF (employee) deduction is above 500, use 500
- Accumulated PCB (until before current month): Monthly PCB deduction * Total months from Jan until last month
Note: You can see your monthly PCB deduction in your payslip
- Fill in your Current Month’s Remuneration | Current Month’s EPF Deduction | Bonus Amount
- Click Calculate & you will get your PCB on Basic Salary & PCB on Additional Remuneration
3B. Calculate manually using PCB Schedule
- Calculate your monthly taxable income
Calculate bonus divided up equally into 12month: Total Bonus / 12
+ Add current month basic salary
– Deduct current month EPF (employee) (Note: Max 500)
= Get Total Chargeable Income
- Check the PCB Schedule for your PCB on Total Chargeable Income
- Check the PCB Schedule for your PCB on Basic Salary
- Calculate PCB on Additional Remuneration
( PCB on Total Chargeable Income – PCB on Basic Salary ) X 12months
- PCB for Month = PCB on Basic Salary + PCB on Additional Remuneration
Does this accurately help you to estimate your PCB & take home pay during your bonus month(s)?
Is there any information that needs further clarification?