MTD vs PCB: Understanding Tax Deductions for Malaysian Payroll
Clearing up the confusion between Monthly Tax Deduction and Potongan Cukai Bulanan
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MTD and PCB are the SAME thing - just English (Monthly Tax Deduction) and Malay (Potongan Cukai Bulanan) terms. Both refer to mandatory monthly income tax deduction from employee salaries remitted to LHDN. Use either term - they're interchangeable in Malaysian payroll.
This guide clarifies the MTD vs PCB terminology confusion and explains how monthly tax deductions work in Malaysian payroll.
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Frequently Asked Questions
What is the difference between MTD and PCB?
MTD (Monthly Tax Deduction) and PCB (Potongan Cukai Bulanan) are the same thing - just English and Malay terms. Both refer to the mandatory monthly income tax deduction from employee salaries remitted to LHDN. They are used interchangeably.
What does PCB stand for?
PCB stands for Potongan Cukai Bulanan, which translates to Monthly Tax Deduction in English. It is Malaysia's pay-as-you-earn (PAYE) tax system where employers deduct estimated income tax from employees' monthly salaries.
What does MTD stand for?
MTD stands for Monthly Tax Deduction, the English equivalent of PCB (Potongan Cukai Bulanan). Some official LHDN documents use MTD, while forms like CP39 use PCB. Both refer to the same monthly tax deduction system.
Why does LHDN use both MTD and PCB terms?
LHDN uses both terms for different audiences: PCB is commonly used in Malay-language documents and forms, while MTD appears in English communications. Functionally identical - employers can use either term.
How is MTD/PCB calculated?
MTD/PCB is calculated based on: annual projected income, tax reliefs (personal, spouse, children, EPF), and progressive tax rates (0%-30%). The annual tax is divided by remaining months to determine monthly deduction.
What forms are used for PCB/MTD remittance?
Form CP39: Monthly PCB remittance form submitted with payment. Form CP39A: Additional PCB schedule if CP39 space insufficient. Form CP21: Notification of employee leaving employment. Form EA: Annual tax statement for employees.
Is STD different from MTD/PCB?
STD (Schedular Tax Deduction) is different from MTD/PCB. STD applies to non-residents at flat rates (e.g., 10% for royalties, 15% for services). MTD/PCB applies to resident employees using progressive rates.
Can employees opt out of MTD/PCB?
No, MTD/PCB is mandatory for eligible employees. Employers must deduct and remit PCB regardless of employee preference. Employees can adjust deductions through tax relief declarations (Form TP1) to reduce monthly PCB.
What is e-PCB system?
e-PCB is LHDN's electronic system for PCB remittance at eps.hasil.gov.my. Employers can: submit PCB data online, make payments electronically, generate CP39 forms, view payment history, and manage employee tax information.
What happens if MTD/PCB is more than actual tax?
If total PCB deducted exceeds actual tax liability, employees can claim refund when filing annual tax return (Form BE/B). Alternatively, employees can submit TP1 form mid-year to reduce ongoing PCB based on updated reliefs.