Short answer. PCB, also called MTD (Monthly Tax Deduction), is the income tax employers deduct from employees’ monthly pay and pay to LHDN on their behalf. It is calculated using LHDN’s published method or calculator, based on the employee’s pay, reliefs and status. Use the current LHDN specification, because it is updated.
Axecta provides payroll processing and employer compliance for companies across Malaysia. Talk to our team.
In this article
What PCB/MTD is
PCB (Potongan Cukai Bulanan) or MTD is a system of paying employees’ income tax through the year. The employer deducts an amount from each salary and pays it to LHDN. At the end of the year, the employee’s final tax is worked out in their own tax return, and PCB paid counts as a credit.
Who must deduct and remit
Employers must deduct PCB for employees whose pay is high enough for tax to apply under LHDN’s method. Employers register with LHDN for employer obligations and pay PCB monthly. Foreign employees can be treated differently, so check the guidance.
Inputs to the calculation
Need this done for you? Axecta’s payroll processing and employer compliance team can handle this for your company. See the payroll processing and employer compliance service.
LHDN’s method uses information such as:
- The employee’s monthly remuneration, including bonuses and benefits.
- Year-to-date pay and deductions.
- Marital status and number of children.
- Declarations by the employee for reliefs and rebates.
- Contributions to EPF and other approved items.
Collecting the correct employee declarations is important. Ask staff to update them when their circumstances change.
LHDN’s calculator and specification
LHDN publishes an online calculator and a computerised specification for payroll software. The specification is revised from time to time. Make sure your payroll software or provider uses the current version.
Remitting and reporting
- Pay the total PCB to LHDN by the monthly due date and use the correct reference.
- Submit the monthly PCB information if LHDN requires it.
- At year-end, provide each employee with their remuneration statement and file the employer’s annual return.
Dates are in the compliance calendar.
Year-end forms
Employers file annual employer returns and give employees their statements so they can file their own returns. Keep a reconciliation of PCB deducted, paid and reported.
Common mistakes
- Using an outdated calculation method.
- Not updating employee tax declarations.
- Not deducting PCB on bonuses or benefits that should be included.
- Paying late or to the wrong reference.
- Mismatch between payroll records and amounts paid to LHDN.
How Axecta helps
Axecta’s payroll team calculates PCB using LHDN’s current method, remits it on time and files the employer’s annual return. See outsourced payroll services.
Where to find LHDN’s method
LHDN publishes PCB calculation tools and specifications on its website at hasil.gov.my. We could not load the specific PCB specification page during our check, so open the page for the current year and note its date. Payroll software vendors must follow the specification, and a payroll provider should state which version it uses.
Employee declarations and updates
Ask each employee for: marital status and spouse’s income status, number of children and their status, claimed reliefs, and any additional remuneration expectations. Refresh them at least yearly and when something changes. A simple form kept on file is enough.
Reconciling PCB
Each month compare: PCB deducted in payroll, PCB paid to LHDN and PCB in the ledger. Differences usually come from late joiners, corrections or timing. At year-end the employee statements must agree with the total paid.
Frequently asked questions
What is PCB?
A monthly tax deduction withheld by the employer from salary and paid to LHDN.
Who must deduct PCB?
Employers, for employees whose pay requires deductions under LHDN’s method.
How is PCB calculated?
Using LHDN’s published method or calculator, based on pay, status and declared reliefs.
When is PCB paid?
By the monthly due date set by LHDN. Axecta can manage it.
Where is the PCB specification?
On LHDN’s website. Use the current year’s version.
Who provides tax declarations?
Employees, using a form you provide.
How do I check PCB is right?
Reconcile payroll, payment and ledger each month.
Want PCB calculated and remitted for you?
Axecta Management Services is a full-suite accounting, company secretarial and consulting firm in Kuala Lumpur, serving companies from SMEs to MNCs.
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Keep reading
- Employer Payroll Obligations in Malaysia
- Monthly Payroll Processing Checklist
- When Is Corporate Tax Payable in Malaysia?
- Outsourced Payroll Services: What Do They Include?
- CP204 Estimated Tax: How It Works
- What Business Expenses Are Tax-Deductible in Malaysia?
- Employee Costs & Hiring Employees: the full guide
Official sources to check
This article is general information and not legal, tax or accounting advice for your company. Rates, thresholds, deadlines and procedures change, so confirm current requirements with the sources above or with Axecta.