Malaysia - Employer’s Responsibilities on Monthly Tax Deduction (PCB) in Malaysia

Statutory Body: Lembaga Hasil Dalam Negeri (LHDN)

Monthly Tax Deduction (PCB)

1) Employer’s Responsibilities

Deduct the PCB from the remuneration of employee in each month or the relevant month in accordance with the Schedule of Monthly Tax Deductions or Computerised Calculation Method and pay to the Director General.

1. Make additional deductions from employee’s remuneration in accordance with the direction given by the Director General under Rule 4 of PCB Rules.
2. Employer shall pay to the Director General, not later than the fifteen day of every calendar month, the total amount of tax deducted or should have been deducted by him from the remuneration of employees during the preceding calendar month.
3. Furnish a complete and accurate employees’ information of the following in a return when submitting PCB payments/additional deductions:
   1. income tax number (if any);
   2. name as stated on identity card or passport;
   3. new and old identity card number/police number/army number or passport number (for foreign employee); and
   4. PCB/additional deductions amount.

2) PCB Computation for additional remuneration year 2009 onward

Remuneration means income in respect of the gains or profits from an employment other than benefits in kind under paragraphs 13(1)(b) and 13(1)(c) of the Act provided that in a case where an irrevocable election is made by an employee under rule 2A, the gains or profits from an employment shall include the benefits in kind under paragraphs 13(1)(b) and 13(1)(c) of the Act.

Normal remuneration- means monthly fixed remuneration paid to an employee whether the amount is fixed or variable as stated in the employment contract written or otherwise.

Additional remuneration- means any payment paid to an employee either in one lump sum or periodical or in arrears or non fixed payment or any additional payment to a current month`s normal remuneration. Such additional remuneration includes:

Types of Remuneration Subject to PCB

i. salary	viii. director fees
ii. wages	ix. perquisite
iii. overtime payment	x. employee`s share option scheme (ESOS)
iv. commission	xi. tax borne by the employer
v. tips	xii. gratuity
vi. allowance	xiii. compensation for loss of employment
vii. bonus/ incentive	xiv. other remuneration related to employment

Note: Beginning from the year of assessment 2009, director fees or bonus relating to a year which is received in any current year, that remuneration becomes part of remuneration in the current year it is received.

From 1 January 2015, Benefit In Kind (BIK) and Value Of Living Accommodation (VOLA) are part of remuneration which is subject to Schedular Tax Deductions (STD).

3) Method of PCB Payment By Employer

Effective from 1 September 2019, Inland Revenue Board of Malaysia (LHDN) will not accept PCB information submitted manually using CP39 / CP39A manual form, through diskette, pen drive, or compact disk (CD). Employer may either use e-PCB, e-Data PCB or e-CP39 which currently accessible through LHDN official website (www.hasil.gov.my).

Effective from 1 September 2019, LHDN will not accept PCB payment paid using cash or cheque at its payment counter or send through post or courier.

In continuous effort to promote the use of electronic payment (e-payment), LHDN has provide various medium of payments for employers to pay the Monthly Tax Deduction (PCB). Employer can make PCB payment via electronic medium (on-line) facility either through FPX, IBG or through internet banking portal of several commercial banks which have been appointed as tax collection agents by LHDN.

a) PCB Payment Through Internet
b) Penalty for Late Remittance of PCB
Any employer who fails to remit PCB payment on or before the 15th day of the following month has made an offence that subject to fine imposition. The fine imposed will be a minimum of RM200 but not more than RM20,000 or 6 months imprisonment or both.

An employer who fail to deduct PCB from employee salary or deducts but fails to remit the PCB to LHDN can be prosecuted in a civil court. The PCB amount not deducted will become a debt to the Government.

c) PCB Payment for Non Resident Employee
PCB of an employee who is not resident or not known to be resident in Malaysia shall be calculated at the rate of 28% of his remuneration for the year 2016 onwards.

4) Yearly Remuneration Statement (EA/EC form)

Refer to Section 83(1A), Income Tax Act 1967, with effect from year of assessment 2009, every employer shall, for each year, prepare and render to his employee statement of remuneration of that employee on or before the last day of February in the year immediately following the first mentioned year.

5) e-PCB System (Schedular Tax Deduction)

e-PCB available for employers who do not have a computerised payroll system to calculate and verify STD calculation.

The system helps employers to store employee information and submit STD payment data to the LHDN on-line.

This time saving system ensure correct and accurate STD calculation.

6) e-Data PCB

e-Data PCB system allows employer to validate and upload CP39 text file through online. It also helps employer submits the data with the format specified by the Inland Revenue Board of Malaysia(LHDN).

User has to register before using this system. Please check your email and click on link provided to activate the account after registration.

7) Retire or Cease From Employment

The employer is responsible for notifying LHDN at least thirty days before the date the employee ceases employment if:

1. Employee is about to retire.
2. Employee is subject to PCB scheme and the employer has not made any deduction.
3. Employee is about to leave Malaysia permanently.

8) e-CP39 System

e-CP39 is a new method for employer to submit employee Monthly Tax Deduction (PCB) data and make online payment. This system is specifically used by the employer who did not have a computerized payroll system. The use of e-CP39 can saves time and simplifies the calculation of PCB.