MTD as final tax LHDN

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Key takeaway

You will understand:

1. What is Monthly Tax Deduction (MTD)?

2. Who is eligible to treat MTD as Final Tax?

3. What is the requirement?

4. Any application needed?

5. What is the consequence of non-compliance?

Summary of learning

1. What is Monthly Tax Deduction (MTD)?

Monthly tax deduction is also known as “Potongan Cukai Bulanan (PCB)”.

This is a deduction mechanism for employer to deduct the employee's monthly remuneration for the purpose of paying the employee's income tax.

2. Who is eligible to treat MTD as Final Tax?

Taxpayers who have employment income only and MTD has been deducted are given an option for not to submit the Income Tax Return Form (ITRF) via e-Filing or manually.

3. What is the requirement?

· There is only employment income received in the current year including any previous year’s employment income.

· Served with the same employer.

· Taxes are not borne by the employer.

· Husband or wife does not make the choice to be assessed jointly under Section 45 of the Income Tax Act 1967.

· MTD is deducted in accordance with the Income Tax (Deduction From Remuneration) Rules 1994 and included Benefit in Kind(BIK) and Value of Living Accommodation (VOLA).

4. Any application needed?

Taxpayer who meets the requirements and does not submit the ITRF after the due date:-

· will be deemed to choose not to file the ITRF

· the MTD will be deducted against the tax payable for the year of assessment

· no tax refund can be claimed if there is any excess of tax paid in his MTD

5. What is the consequence of non-compliance?

The Director General of Inland Revenue (DGIR) retains the power to disregard the total amount of MTD deducted as the final tax payable and raise a deemed assessment or an additional assessment penalty as followings: -

· Imposed the penalty under subsection 112(3) of the Income Tax Act 1967

· Raise an estimated assessment under Subsection 90(3) of the Income Tax Act 1967

Sources

Layanan Cukai Ke Atas Cukai Muktamad - http://phl.hasil.gov.my/pdf/pdfam/NA_1_2021.pdf

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