Potongan Cukai BUlanan (PCB) or Monthly Tax Deduction (MTD)
What is PCB/MTD?
Potongan Cukai Bulanan (PCB) is a system of tax deduction where employers will deduct the remuneration of their employees every month in accordance with the PCB deduction schedule. It is compulsory to do so because it is made mandatory by the government. PCB is a mechanism in which employers deduct monthly tax payment from the remuneration of the employees. The company will pay the amount to the IRB, the employers need to make the payment before 15th of every month for the prior month’s PCB. Failing which, the minimum fine is RM200 but not more than RM20,000 or 6 months imprisonment or both.
PCB not the final tax
Most people are confused about the PCB and income tax filing. Many people think that PCB is the final tax that they need to pay to the IRB. In some circumstances, it is the final tax, but it is not the final tax in most of the circumstances. PCB helps to reduce the employee’s burden to pay in one lump sum amount of tax. In the normal circumstances, PCB is not enough to cover the actual tax payable of the employee. PCB allows employees to reduce the amount of the tax required to be paid by employees by deducting the remuneration to pay the monthly tax payment in advance to the IRB. However, employees should continue to file tax returns.
Why tax-filing is needed?
It is better for the employees to file the tax return because it can amend the mistakes that may occur during the tax processing in the year. If you have underpaid the taxes due to incorrect calculation of PCB, you can prevent any future problems of owing a large amount of taxes that are required to pay in the future by filing the tax return. On the other hand, if you overpaid the taxes, filing a tax return allows you to claim a tax refund for the amount that you have overpaid by yourself.
Exemptions for PCB/MTD
You are responsible to pay tax even if you pay PCB every month. Provided you meet the conditions below, you may not be responsible to file a tax return.
Conditions:
● Your only source of income is your employment income;
● You have been working for 12 months in the calendar year with the same employer;
● Your employer has been deducting PCB from your salary, correctly;
● Your employer is not paying any of your taxes; and
● You have not opted for a joint assessment with your spouse.
Only if you fulfilled these 5 conditions, you are not compelled to file a tax return. You will be deemed to have the choice to not submit a return. However, if any of the conditions does not fulfill, you are responsible to file a tax return.
Why AL Account Management？
Our founder is Chartered Accountant with the Malaysian Institute of Accountants (MIA), member of Association of Chartered Certified Accountants (ACCA) and Company Secretary in Malaysia. Our dedicated professional team provides a comprehensive and professional service to your company based on your needs. We will provide the high quality of service from our professional team. For more information, please contact us by dropping us an email at [email protected].
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Reference: MTD Payment
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