Malaysian Bonus & Tax Calculations

Received your bonus or commission but wondering about the large deductions that are incurred? Find out how to calculate your Malaysian Bonus & Tax calculations.
Updated: Jul 26, 2018

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:

  • Salary/Wages
  • Overtime Pay
  • Commission
  • Tips
  • Allowance
  • Bonus/Incentive
  • Director fees
  • Perquisite (perks)
  • Employee’s Share Option Scheme (ESOS)
  • Tax borne by the Employer
  • Gratuity
  • 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 in Y2014 4,000 (if spouse not working)
  • Deduction for child – 1,000 in Y2014 2,000 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. Computerised Calculation Method
  2. Schedule of Monthly Tax Deductions

Method

1. List down your salary & bonus/other remuneration

2. Calculate your EPF, SOCSO & EIS deductions

Note: for EPF include salary + bonus, SOCSO is a fixed monthly amount

EPF (default) Employer: 12% | Employee: 11%

SOCSO (max at above RM3900 monthly) Employer: 69.05 | Employee: 19.75

Employment Insurance Scheme (EIS): Employer: 0.2% | Employee: 0.2% (max RM20 or RM4,000 salary per month)

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

pcb-calculator

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

pcb-manual

3C. Calculate using the MyPF Monthly Tax Deduction (PCB) Calculator

Calculator screenshot

 

FAQ

Q: I am getting employee benefits from my company. Is it taxable?
A: Employee benefits (aka perquisites) are considered income and taxable. There are some exemptions as below claimable.

 

Share and discuss on Malaysian Bonus & Tax Calculations

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?

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16 thoughts on “Malaysian Bonus & Tax Calculations

  • December 21, 2015 at 7:29 am
    Permalink

    Very very informative! I wish had seen this last year itself. Excellent Steve! 🙂

    Thanks Gauthemen. Glad it’s useful!

    Reply
  • January 29, 2016 at 1:59 pm
    Permalink

    PCB for Month = PCB on Basic Salary + PCB on Additional Remuneration

    1.Does the above include the deduction of tax for that current month salary ?
    2. Or deduction for bonus only?

    Regards,
    jane

    Jane, good question. It’s for both the current month salary + bonus.

    Reply
  • February 2, 2016 at 11:19 am
    Permalink

    Hi.. this is very informative and clear. Question, what if the employee receiving bonus is relatively new – say only 5 months into the job? Should I multiply X6 when calculating PCB on Additional Remuneration?

    Thank you.
    Yau

    Hi Eileen Yau. Good question there. The calculation for number of months should be based from when the employee joined the organization until the bonus declaration month.

    Reply
  • March 31, 2016 at 12:36 pm
    Permalink

    Hi,

    If i receive 7000MYR for month what are can be included in the allowances per month to avoid tax since i am a resident and indian national

    Can you please share the
    like this

    Basic pay : 6000
    Parking : 500
    Petrol : 500

    Can you help on this

    Hi Sateesh, Taxes are on all income, perquisites & benefits in kind. There are certain tax exemptions which are applicable including on leave passage outside Malaysia, traveling allowances/petrol (max 6k/yr), dental & child care benefits, parking & meal allowances. As long as you have it all in black & white it should be applicable. Best to check with a tax accountant though if unsure. Hope you’re having a good career & life experience here in Malaysia.

    Reply
  • June 13, 2016 at 1:33 pm
    Permalink

    Hi Stev,

    If the new hiring company was buying the bond of existing company which I’m still work at. How the tax will be charge.

    Let’s said the amount is RM35,000 ? Can the tax be relief ?

    If the payout is attributed & recorded, it will count as income & be subjected to tax during your next tax submission.
    Tax relief would be subject to standard deductions.

    Reply
  • January 20, 2017 at 9:56 am
    Permalink

    Hi, I have an Question, if only get pay for Bonus, which mean the Bonus Amount – EPF 11% – Income Tax (According to the Tax Table Schedule) = balance of the amount to be paid to the Staff, am I right? Bonus no need to deduct for Socso, correct me or not?

    Hi Angel, Yes you are right. Bonus is not subjected to SOCSO.

    SOCSO Guidelines:
    “Wages” for contribution purposes refers to all remunerations payable in money by an employer to an employee. Among the remunerations are as follows :

    1. Basic salary
    2. Overtime
    3. Commission
    4. Payments in lieu of annual leave, medical leave, maternity leave, rest days, off days, public holidays and so forth
    5. Allowances (e.g: incentive, good behavior, cost of living and so forth)
    6. Service charge

    Payments that are not defined as wages are:

    1. Any contribution payable by the employer towards to any pension or provident fund
    2. Any travelling allowance or concession
    3. Any gratuity payable on discharge or retirement
    4. Annual bonus
    Reply
  • February 3, 2017 at 3:18 pm
    Permalink

    Under PCB Allowed Deductions, you mention that:
    ‘Contribution to EPF or other approved scheme – 12000 (500/mth)’. Is this 6000 per year or 1000 per month?

    Great article. Thanks!

    Thanks Dinesh!
    The contribution to EPF & other approved schemes is 6,000 for an individual per year. The article has been corrected to better reflect this.

    Reply
  • November 22, 2017 at 11:51 am
    Permalink

    Hi,

    If Phone Allowance subject to monthly PCB Contribution?

    Thanks

    Hi Wong, for phone allowance it depends. If it’s a fixed monthly amount without receipts will be in PCB. If it’s a monthly phone bill with receipt reimbursement claims then it is exempted from PCB.

    Reply
  • January 10, 2018 at 1:11 pm
    Permalink

    Hi, If basic salary and bonus to be paid separately by employer. Is the PCB calculation for bonus is the same as above formula?

    Hi Megan, yes the PCB calculation for bonus would be the same even if paid separately.

    Reply
  • January 15, 2018 at 1:59 pm
    Permalink

    Hi! I’m Ryan here. I would like to know is medical leave & annual leave will consider in bonus payout.
    E g : Salary + allowance – epf – PCB – medical leave – annual leave =

    Many thxs

    Hi Ryan, Your annual and medical leave will not be considered (unless it’s specifically recognised as income by your company – ie AL converted to cash).

    Reply
  • February 2, 2018 at 12:19 pm
    Permalink

    Hi! If I receive my bonus in Jan 2018, so how do I calculate my tax amount?

    Hi Grace, It depends on whether your bonus if for 2017 remuneration or 2018 remuneration. For example, if additional remuneration paid during 2018 is for previous year 2017 remuneration, taxation based on MTD calculation under Bonus Formula should be based on December remuneration for 2017.

    Reply
  • March 1, 2018 at 5:07 pm
    Permalink

    Hi,

    Suppose if I get a Salary of RM 7,000 anually and I have Annual Leave Encashment of RM 4,000 for last 12 Months which is to be re-imbursed in February. What should be my total tax Deduction? Please advise.

    1) Will it be for RM 11,000 (RM 7,000 + RM 4,000) as a whole
    2) or Will it be RM 7,000 Tax + RM, 4,000 tax

    Hi John, The annual leave converted to cash would be part of your earnings. Your tax would be calculated for the month’s earnings as a whole (similar to scenario #1 you mentioned above)

    Reply
  • March 6, 2018 at 3:29 pm
    Permalink

    Hi,

    I would like to know the calculation on monthly PCB deduct on my payslip, as i do the calculation and refer to the PCB schedule above, result is different.
    example: basic salary RM4k, Allowance RM1k, performance bonus monthly RM1k, how is the PBC calculate ?

    Hi Eric, A quick calculation shows around RM240 monthly PCB. The number may differ as well depending on how your performance bonus is recorded as. What is your monthly PCB versus your calculation?

    Reply
  • March 14, 2018 at 11:16 pm
    Permalink

    Hi, I’m Ken here. a car salesman with earning Basic + Commission. I would like to ask a question that help all of the salesman. Let’s say my commission for 1 car is RM2,000, I promise to give a full tank petrol, car tinted film, smart tag for my customer that cost me around RM1,200 on my own. so how to i declare the income tax which I’m not earning RM2,000 per car? because at the end of year mayb my annual total basic + commission is RM80,000 on EA form. But actually after deduct the free gift, my Annual income is just RM50,000.

    Hi Ken, I’m sure many salesmen will thank you for asking this relevant question. There are a few ways to approach expenses in the course of your business activity.
    1. If you can claim the expenses from your company, you do not need to submit it as income. You will however need to keep proof of expenses & claims.
    2. If you’re operating as your own business (ie registered as a sole proprietorship/partnership/etc), you can declare the expenses as part of your cost of doing business.
    3. Unfortunately if you do not fall under the scenarios above, as an employee you are not able to deduct the expenses you incur to reduce your income.

    Reply
  • April 5, 2018 at 2:26 pm
    Permalink

    Hello, I am Jean. My company supports me on schooling costs. They pay directly, and school cost does not appear anywhere in my payslips. Is this a benefit taxable at my level, or is this similar to other types of company supports (e.g. temp accommodation during relocation), so not taxable benefit for me?

    Hello Jean, this employee benefit (aka perquisite) is likely considered as income and taxable. It depends through how your company treats it. You can check with your EA Form and company payroll/HR to confirm. Some perquisites are tax exempt though schooling costs are not.

    Reply
  • April 20, 2018 at 9:52 pm
    Permalink

    Hi, if my bonus out on Feb 2018 for previous year 2017 remuneration. Separate payslip with Feb 2018. My 2017 EA form doesn’t cover this bonus. So should I fill it in 2017 or 2018 (next year) income tax?

    Hi Casy, It will be part of your 2018 remuneration and (near year) income tax.

    Reply

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