# PCB and Monthly Tax Deduction: The Employer's Withholding Duty

> How monthly tax deduction works in Malaysia — computing PCB, remitting through e-PCB, the CP38 directive, and the notification forms that attach to hiring, cessation and departure.

- Category: employment
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/employment/pcb-mtd-malaysia

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PCB is the only line on a Malaysian payslip where the employer is holding
someone else's money and can end up personally liable for it. EPF and SOCSO are
contributions. Monthly Tax Deduction is the employee's income tax — withheld,
held, and owed onward. Fail to remit it and LHDN does not chase the employee.
It chases you, and the amount is a debt due to the Government recoverable by
civil action.

That asymmetry should shape how a finance team treats the PCB account, and it is
the reason this stream deserves separate handling from the contribution streams
it shares a deadline with.

## How is PCB calculated and paid?

The amount is determined one of two ways: the **Computerized Payroll Calculation
Method**, or by referring to the schedule of MTD accessible through **e-CP39** on
the HASiL portal. The computerised method is governed by the Income Tax
(Deduction from Remuneration) Rules 1994, as amended, and LHDN publishes the
calculation specification for payroll vendors to implement.

Submission of the MTD statement runs through three free applications on the
official portal, reached via MyTax and the ezHasil services menu:

| Application | Intended for |
| --- | --- |
| **e-PCB** | Employers without a computerised payroll system, managing employee records directly on the portal |
| **e-Data PCB** | Employers uploading a text file generated by their payroll software |
| **e-CP39** | Employers submitting employee MTD data and paying online without a payroll system |

LHDN's position is firm on channel: employers may **only** use e-PCB, e-Data PCB
or e-CP39 for submitting the MTD statement or employee MTD data.

Payment itself can then be made by FPX on the HASiL website after completing the
submission, by interbank giro at a bank counter or through internet banking
using the **PCB / CP39 account number**, or in cash at a CIMB counter.

The deadline is **on or before the 15th day of the subsequent month**.

## What is CP39, and how does it differ from CP38?

These two forms are constantly confused because the numbers are adjacent. They
do entirely different jobs.

**CP39 is the statement.** It is the schedule accompanying your payment that
tells LHDN which employee had how much withheld. Every employer submitting PCB
produces CP39 data, whether through e-Data PCB, e-PCB or e-CP39. It is routine,
monthly and universal.

**CP38 is a directive.** It is an instruction issued by LHDN to an employer to
deduct a specified additional amount from a particular employee's salary in
order to settle that employee's **income tax arrears**. It does not arise from
the current year's remuneration at all. It arrives, names an employee and an
amount, and creates a fresh obligation.

The operational rule that matters: LHDN requires employers to **separate the MTD
and CP38 payment amounts**. They are not netted, not combined into a single
figure and not reported as one line. An employer who folds a CP38 deduction into
the monthly PCB total has misallocated the payment, and the employee's arrears
remain outstanding on LHDN's records.

A CP38 directive is also employee-specific and time-limited. It does not
authorise standing deductions beyond what the instruction states, and it does not
replace the ordinary PCB running alongside it.

## What forms attach to hiring, leaving and departure?

This is where employers most often default, because the triggers are events
rather than dates and nobody sends a reminder.

| Form | Event | Deadline | Channel |
| --- | --- | --- | --- |
| **CP22** | New employee subject to or eligible for tax | Within 30 days after commencement | e-CP22 on MyTax, mandatory since 1 September 2024 |
| **CP22A** | Cessation of employment, private sector | Not less than 30 days before cessation | e-SPC on MyTax, mandatory since 1 January 2024 |
| **CP22B** | Cessation, public sector | As above | e-SPC |
| **CP22A / CP22B** | Cessation by death | Not more than 30 days after being informed | e-SPC |
| **CP21** | Employee leaving Malaysia over 3 months | Not less than 30 days before expected departure | e-SPC, mandatory since 1 January 2024 |

Manual submission of CP22 is no longer permitted at all.

Read the cessation deadline carefully. **CP22A runs backwards from the event** —
not less than 30 days *before* the employee ceases. An employee who serves a
30-day notice gives you almost no margin; one who is released early gives you
none. This is a deadline that expires before the thing it relates to happens,
which is why so many employers miss it.

There is a carve-out. The form is not required where the employee's income is
subject to MTD, or where their monthly remuneration falls below the minimum
eligible for MTD. LHDN publishes a determination table and a guideline on the
tax clearance letter procedure for working out whether a given case is caught.

Similarly, CP21 is not required where the Director General is satisfied that the
employee must leave Malaysia frequently in connection with their employment.

## The 90-day withholding duty

This is the provision that turns an administrative oversight into a cash loss.

Where an employee ceases employment, dies, or leaves Malaysia for more than three
months without intending to return, the employer must **withhold any money
payable to that employee** and must not pay it to or for their benefit without
LHDN's permission until **90 days after LHDN receives the CP21 or CP22A**, or
until a tax clearance letter is issued.

The commercial instinct — settle final salary, unused leave and any pro-rated
bonus on the last working day — breaches this duty directly. Worse, it disposes
of the only fund from which the employee's outstanding tax could have been paid,
while leaving the employer responsible for paying the full amount of tax payable
by that employee.

For a departing expatriate this is not a theoretical risk. Once the person has
left Malaysia with their final pay, recovery is the employer's problem alone.

## What are the penalties?

Failure to comply with the s.83 obligations, without reasonable excuse, carries
on conviction a fine of **not less than RM200 and not more than RM20,000**, or
imprisonment for a term **not exceeding six months**, or both.

Separately and more commonly applied: employers are responsible for paying the
full amount of tax payable by their employees, and that amount constitutes a
**debt due to the Government** which may be recovered through civil action. The
relevant provisions are ss.83(2) to 83(5), s.106, s.107(4) and s.120(1) of the
Income Tax Act 1967.

Records must be kept for **seven years** and be readily accessible to LHDN.

## Common mistakes

**Combining CP38 with PCB in one payment.** LHDN requires the amounts to be
separated. Combining them leaves the employee's arrears unresolved.

**Reading CP22A as a post-event form.** It is due at least 30 days before
cessation. Treating it like CP22, which is due within 30 days after
commencement, produces a late filing on almost every resignation.

**Releasing final pay on the last working day.** The 90-day withholding duty runs
from LHDN's receipt of the form. Early release breaches it and strands the tax
liability with the employer.

**Assuming PCB is the employee's problem.** It is the employer's debt to the
Government once withheld or once it should have been withheld.

**Submitting MTD data outside the approved applications.** Only e-PCB, e-Data PCB
and e-CP39 are permitted.

**Filing CP22 on paper.** Not permitted since 1 September 2024.

**Forgetting CP21 for a departing expatriate.** The trigger is leaving Malaysia
for more than three months, not termination of employment. An employee on a long
overseas secondment can trigger it while remaining on your payroll.

## What's next

Audit three things: that your CP38 payments are being remitted separately from
PCB, that your offboarding checklist puts CP22A at least 30 days ahead of the
last working day, and that final pay is held rather than released.

Then reconcile the annual side — Form EA to employees by the last day of
February and Form E with CP8D to LHDN by 31 March — and the other four monthly
streams sharing the 15th deadline, all set out in the
[payroll compliance calendar](/en/employment/payroll-compliance-malaysia).

## Sources

- Employer's Responsibility — https://www.hasil.gov.my/en/majikan/tanggungjawab-majikan/ (LHDN)
- MTD Payment — https://www.hasil.gov.my/en/majikan/pembayaran-pcb/ (LHDN)
- Notification of New Employees — https://www.hasil.gov.my/en/majikan/pemberitahuan-pekerja-baharu/ (LHDN)
- Notification of Cessation of Employment — https://www.hasil.gov.my/en/majikan/pemberitahuan-pemberhentian-kerja/ (LHDN)
- Method — MTD Income Tax Rules — https://www.hasil.gov.my/en/majikan/kaedah/ (LHDN)

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