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Amendment to deduction from remuneration rules

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EY Malaysia Tax

13 Jan 2020
Subject Tax alert
Categories Tax alert
Jurisdictions Malaysia

The Income Tax (Deduction from Remuneration) (Amendment) Rules 2019 [P.U.(A) 387], gazetted on 31 December 2019, take effect from 1 January 2020 and amend the Income Tax (Deduction from Remuneration) Rules 1994 [P.U.(A) 507].

The Income Tax (Deduction from Remuneration) Rules 1994 provide that the employer must determine and make monthly tax deductions (MTD) from employees’ salaries based on either the Schedule of MTD or the computerized calculation method. The Schedule is issued for employers who do not use a computerized payroll software. However, employers using the Schedule are advised to use the computerized calculation method if the employee receives a salary adjustment, elects for optional deductions or commences employment other than in January.

The amendments are to take into account the new tax bracket with effect from YA 2020, where:

(i)    Individual taxpayers with chargeable income exceeding RM2,000,000 will be subjected to tax at 30%, an increase of two percentage points from 28%; and

(ii)   The non-resident personal income tax rate will also be increased to 30%.