What Is PCB: The Ultimate Guide

Last updated on Apr 18, 2023

In growing the Malaysian economy, one important source of financing our progress is through taxes. Among the various taxes imposed on Malaysians is the PCB, and it is fundamental that individuals know what is PCB.

This article will explain the PCB in detail, as well as highlight what falls under this taxation category. Continue reading to learn more.

What is PCB?

PCB stands for ‘Potongan Cukai Bulanan’ and is also often referred to as ‘Monthly Tax Deduction’ or MTD. These deductions contribute towards the payment of employee income taxes at the end of the financial year.

The PCB was introduced in order to support taxpayers who faced difficulties paying a lump-sum tax. Payment for PCB is scheduled monthly and is retained by employers to be paid to LHDN, or Lembaga Hasil Dalam Negeri Malaysia.

What is Subject to PCB?

Various aspects of income are subject to PCB, with the most prominent being an employee’s monthly salary. Aside from that, PCB also applies to income, such as overtime pay and tips. See the full list of taxable and non-taxable incomes below:

Remunerations Subjected to PCB

Salaries
Overtime payment
Commission
Tips
Bonuses
Allowances
Director’s fees
Perquisite
Employee’s share option scheme (ESOS)
Tax borne by the employer
Compensation for loss of employment
Gratuity

Remunerations Not Subjected to PCB

Zakat
Benefits-in-kind
Value of living accommodation

Members of Malaysia’s workforce need to keep themselves up-to-date with labour and tax laws such as the PCB. As the ones retaining PCB contributions before they are paid to LHDN, employers need to be mindful of remunerations.

Should I File for Tax Returns?

Individuals need not always file for tax under the PCB, as PCB is considered a final tax and should be calculated towards the end after going through other forms of taxes. As such, there are certain conditions where individuals can choose not to file for tax returns.

The aforementioned conditions are listed below:

Your employment income falls under Section 13 of the Income Tax Act 1967
You serve under the same employer for a 12-month period
Your PCB is under the Income Tax (Deduction from Remuneration) Rules 1994
Your employer has been deducting and remitting your PCB correctly
Your taxes are not borne by your employer
You have not opted for a joint assessment with your spouse

Like EPF and EIS contributions, the PCB is another aspect of local labour laws affecting both employees and employers. Thus, it is important for individuals to know what is PCB, and how it affects them financially.

For more information on Malaysian labour practices and how to stay compliant with local labour laws, you can visit Kakitangan.com’s main blog or email us at sales@kakitangan.com. Our HR experts are ready to assist.