Tax Calculation Method

The system calculates Assessable Income by taking total annual income including overtime, deducting personal expenses, deducting various allowances, and then calculating the tax on the net assessable income.

Net Assessable Income

= Total Assessable Income (Salary) - Total Annual Deductions (EPF Contribution, PERKESO Contribution, Individual/Spouse/Child Relief)

Progressive Tax Rate

💬 Note

A progressive tax rate means that the tax rate increases with the level of assessable income used to calculate income tax.
The higher the assessable income, the higher the progressive tax rate. Each income bracket uses a different tax rate for calculation, and the taxes calculated at each bracket are added together to determine the total tax payable.

The Progressive Tax Rate can be enabled under the Company/Branch Payroll Settings.

Currently, the Progressive Tax Rate for personal income tax is divided into 10 tiers, ranging from 0% to 30%, based on assessable income from RM 5,000 to RM 2,000,000 and above.

Assessable income level	Tax rate	Tax (RM)
0 - 5,000	0%	0
5,0001 - 20,000	1%	0 150
20,001 - 35,000	3%	150 450
35,001 - 50,000	6%	600 900
50,001 - 70,000	11%	1,500 2,200
70,001 - 100,000	19%	3,700 5,700
100,001 - 400,000	25%	9,400 75,000
400,001 - 600,000	26%	84,400 52,000
600,001 - 2,000,000	28%	136,400 392,000
2,000,001 and Above	30%	528,400

🏷️ Case: Net Assessable income = RM 65, 080.24

Assessable income level	Tax rate	Calculating cumulative tax.
0 - 5,000	0%	0
5,0001 - 20,000	1%	15,000 x 1% = 150.00
20,001 - 35,000	3%	15,000 x 3% = 450.00
35,001 - 50,000	6%	15,000 x 6% = 900.00
50,001 - 70,000	11%	15,080.24 x 11% = 1,658.83
70,001 - 100,000	19%
100,001 - 400,000	25%
400,001 - 600,000	26%
600,001 - 2,000,000	28%
2,000,001 and Above	30%

If the net assessable income is RM 65, 080.24, the Gross Income Tax (before deducting accumulated MTD of previous month and Rebates) is RM 1,658.83 + RM 1,500 = 3,158.83

💬 Note

For other non-recurring Payments that are subject to Tax such as Overtime, Commissions or Bonuses that are classified as Additional Remuneration, the system calculates the tax according to the progressive income tax bracket applicable to that employee.

Fixed Tax Rate

Fixed Tax Rate can be applied for employees whose Monthly Tax Deduction (MTD) is based on a Fixed Percentage.
Fixed Tax Rate can be applied for employees under the following categories:
1. Returning Expert Program (REP)
2. Knowledge Worker
3. Resident (Non-Citizen) holding C-Suite position
4. Any employee whose MTD is based on Fixed Tax Rate (e.g. 15%).
The Fixed Tax Rate can be configured under the Company/Branch Payroll Settings.
Example:
1. Pay Period: February
  
  Marital Status: Single
  
  Basic Salary: RM 6,500*12 = RM 78,000
  
  Deductions
  
  EPF Contribution: RM 715
  
  EPF Contribution Estimate: RM 2,570
  
  PERKESO (SOCSO +EIS): RM 41.65
  
  Individual Tax Relief: RM 9,000
  
  Accumulated MTD of Previous Month: RM 811.98
  1. Net Assessable Income:
    
    RM 78,000 - (RM 715*2) - RM 2,570 - (RM 41.65*2) - RM 9,000 = RM 64,916.70
  2. Personal Income Tax Bracket
    
    RM 64,916.70 * 15% = RM 9,737.51
  3. Income Tax Payable:
    
    (RM 9,737.52 - RM 811.98) * 11 = RM 811.41

🚩Note

If you don't want to deduct taxes for employees, create a separate branch for this group of employees and set the tax rate to a flat rate of 0%.