What is Income Tax PCB? A Simple Guide for Malaysian Employers

Every month, employers in Malaysia take out a part of their employees' salaries for income tax.

This system, called Potongan Cukai Berjadual (PCB), helps employees pay their taxes in smaller amounts throughout the year instead of paying a big lump sum at the end.

For businesses, making sure PCB is calculated and submitted correctly is an important part of managing payroll.

This article will explain everything employers need to know about income tax PCB, including how it works and how to handle payments properly.

What is Income Tax PCB?

PCB is a monthly tax deduction made by employers on behalf of their employees.

The deducted amount is paid to the LHDN (Inland Revenue Board of Malaysia) every month.

The purpose of PCB is to help employees pay their taxes in installments rather than all at once at the end of the year.

PCB is the employee and employer's responsibility. Employers are responsible for deducting PCB from employees’ salaries and submitting it to LHDN.

Employees have PCB deducted from their monthly salary as part of their income tax payment. Then, LHDN collects and manages the tax payments.

Who is Required to Pay PCB?

PCB is for employees who earn more than the taxable income limit set by LHDN.

Employers must deduct the tax from their salaries and send it to LHDN to follow Malaysian tax rules.

1. Employees with Taxable Income

Employees must pay PCB if their income is above the minimum tax threshold set by LHDN which is RM34,000 per annum.

This amount can change yearly, so employers should check the latest tax updates.

2. Malaysian vs. Non-Malaysian Employees

Malaysian employees follow progressive tax rates, where tax rates increase based on income. Non-resident employees are taxed at a flat rate of 30%, regardless of income.

3. Self-Employed Individuals and Freelancers

Self-employed workers and freelancers do not have PCB deductions, as they are responsible for filing and paying their own taxes.

How to Calculate Income Tax PCB

Employers must calculate PCB carefully to deduct the correct amount from employee salaries. Here’s how it works:

1. Determine the Employee’s Monthly Salary

The gross salary includes basic salary, allowances, commissions, and bonuses. Some benefits, such as company cars or free housing, may also be taxable.

2. Identify Taxable Income

Taxable income is calculated after deducting mandatory contributions like:

EPF (Employees Provident Fund)
SOCSO (Social Security Organization)
EIS (Employment Insurance Scheme)

3. Apply the Tax Rate

Malaysia uses a progressive tax system, where higher income means a higher tax rate. The tax rates range from 0% to 30%, depending on annual earnings.

4. Special Cases (Bonuses, Overtime, and Commissions)

For employees earning bonuses, commissions, or overtime pay, these extra earnings are added to their salary and taxed accordingly.

Employer’s Role in PCB

Employers are responsible for calculating, deducting, and submitting PCB. Failure to do this properly can result in penalties and fines.

1. Deduct PCB from Salaries

Each month, the employer must:

Calculate the PCB amount based on taxable salary.
Deduct the amount from the employee’s paycheck.
Provide a payslip showing the PCB deduction.

2. Submit PCB Payments to LHDN

Employers must submit PCB payments to LHDN by the 15th of the following month. If PCB is not paid on time, fines and legal action may follow.

3. Register with LHDN

To pay PCB, employers must register for an employer tax number (E Number) through the MyTax portal.

4. Provide Employees with an EA Form

At the end of the tax year, employers must give employees an EA Form, which summarizes their total income, deductions, and PCB payments.

Employees use this form for their annual tax filing.

PCB Tax Calculation Examples

To understand how PCB deductions work, let’s look at two examples:

Example 1: Monthly Salary Employee

Basic Salary: RM6,000
EPF Contribution (11%): RM660
SOCSO & EIS: RM27.65
Taxable Income: RM5,312.35
PCB Deduction: The amount is calculated based on LHDN’s tax rates.

Example 2: Employee with Bonus

Monthly Salary: RM5,500
Yearly Bonus: RM6,000
PCB for Salary: Deducted as usual.
PCB for Bonus: Taxed separately using the LHDN bonus tax formula.

How to Handle Complex Salary Structures

Some employees receive income beyond a fixed salary, such as commissions, overtime pay, or allowances.

Employers should consider these factors when calculating PCB:

Commissions and Incentives should be treated as taxable income and included in PCB calculations for the month they are paid.
Overtime pay is subject to PCB if it significantly increases taxable earnings.
Some allowances are taxable, while others (such as travel or meal allowances) may be tax-exempt up to a certain limit.

For employees with irregular earnings, using payroll software or the LHDN e-PCB calculator ensures accurate deductions that reflect actual earnings throughout the year.

When and How to Remit PCB to LHDN

Below are the key details on when and how to remit PCB to LHDN.

1. Monthly Submission Deadlines

PCB deductions must be submitted before the 15th of the following month.

If the due date falls on a public holiday or weekend, payments should be made on the last working day before the deadline.

For example:

PCB for March salaries must be submitted by April 15.
PCB for December salaries must be submitted by January 15 of the following year.

2. How to Submit PCB Payments

Employers can pay PCB using:

LHDN’s e-CP39 Portal for manual submission for one-time payments.
e-PCB Portal, online submission for monthly payments.
e-Data PCB for bulk submissions using payroll software.
Bank FPX Payment, online banking through Maybank, CIMB, RHB, and others.
Cheque Deposit Kiosks are available at CIMB Bank kiosks for companies preferring cheque payments.
Employers can also make PCB payments in cash at selected POS Malaysia branches.

3. Late Submission Penalties

Employers who fail to pay PCB on time may face:

Fines up to RM20,000
Imprisonment of up to 6 months, or both fine and jail term, under Section 113 of the Income Tax Act 1967.
Additional penalties on unpaid tax amounts, which may include interest or further legal action.

How to Make PCB Payment

Making PCB payments correctly and on time is crucial for employers to comply with LHDN regulations and avoid penalties.

Below is a step-by-step guide to ensure smooth submission.

Step 1: Log in to the MyTax Portal

Employers must first access the MyTax portal to submit PCB payments. This is the official platform provided by LHDN to manage tax-related transactions.

Step 2: Enter Salary and PCB Deduction Details

Once logged in, employers must enter:

Employee salary details
PCB deductions based on tax calculations
Any adjustments for allowances, bonuses, or other taxable income

This step ensures accurate tax reporting and avoids miscalculations.

Step 3: Choose a Payment Method

PCB payments can be made using various methods:

FPX Online Banking: Available for banks like Maybank, CIMB, RHB, Public Bank, and Hong Leong.
Bank Transfer: Employers can transfer payments directly to LHDN’s bank account.
Cheque Deposit: Payments can be made at CIMB Bank kiosks.
POS Malaysia Counters: Cash payments can be submitted at selected POS Malaysia branches.

Employers should choose a method that best fits their business needs.

Step 4: Submit the Payment Before the Deadline

PCB payments must be submitted by the 15th of the following month. Late payments may result in fines or legal consequences, so it is important to complete this step on time.

Step 5: Maintain Proper Documentation for Payment Records

Employers must keep accurate records of all PCB payments for auditing and compliance purposes. Proper documentation includes:

Payment receipts: A copy of the transaction confirmation from the MyTax portal or bank.
Payroll reports: Documents showing PCB deductions for each employee.
Submission records: Copies of the submitted e-CP39, e-PCB, or e-Data PCB files.

Maintaining well-organized records helps businesses:

Avoid disputes with employees regarding tax deductions.
Provide proof of tax payments if requested by LHDN.
Prepare for financial audits efficiently.

FAQ

What is the minimum salary for PCB in Malaysia?

PCB applies to employees earning above the taxable income threshold, usually between RM3,000 to RM4,000 per month.

How much is income tax in Malaysia?

Malaysia uses progressive tax rates, ranging from 0% to 30%, depending on annual income.

When to file income tax in Malaysia in 2024?

Employees must submit their annual tax return by:

April 30, 2024 (manual submission)
May 15, 2024 (online submission via MyTax)

Who is required to pay income tax in Malaysia?

Anyone earning above the minimum taxable income must pay income tax. Non-residents are taxed at a flat rate of 30%.

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