Introduction to PCB
Lembaga Hasil Dalam Negeri (LHDN) has announced a new PCB calculation method in year 2009. The PCB formula reconciles employee monthly PCB and allow to include personal waiveable tax wages (e.g. books, life insurance, parent medical claims) into monthly PCB calculation. Payroll items supported are such as basic salary, bonuses and additional wages, perquisites, benefit-in-kind (ie. TP2) and many other personal tax reduction items (ie. TP1).
Final PCB result is rounded to the "highest 5 cents".
CP8A Position Summary
Year 2020 - CP8A Settings in Quick PAY:
|Items entered into SALARY ENTRY||CP8A|
|Pay to SOCSO||Pay to|
|Taxable Income / Perquisite Items|
For perquisite items, assign "Tax Exempted Amount" in Table of Codes
|1-21||Salary Entry||(+) / (-)||Section (B)||Section (B)||Yes|
|Employee EPF (Additional)||26||Salary Entry||(-)||E'EPF||E'EPF||Yes||Yes||-||-|
|Employee PCB (Additional)||27||Salary Entry||(-)||E'PCB||E'PCB||Yes||-||-||Yes|
|Employee SOCSO (Additional)||35||Salary Entry||(-)||E'Socso||-||-||-||-||-|
|Taxable income (Arrears)|
|Employee PCB (Arrears)|
|28||Salary Entry||(-)||Arrears E'PCB||E'PCB||-||-||-||Yes|
|Employee EPF (Arrears)|
|32||Salary Entry||(-)||Arrears E'EPF||E'EPF||-||Yes||-||-|
|Foreigner Fee||33||Salary Entry||(-)||-||-||Yes||-||-||-|
|Items entered into TP SECTION|
|TP1 Personal tax waiveable income|
* see below TP1 Settings table
|Annuity Scheme Premium|
|Taxable income (Previous Employer)||50||TP Section||(+)||-||-||Yes||-||-||-|
|Employee EPF (Previous Employer)||51||TP Section||(-)||-||-||Yes||-||-||-|
|Employee PCB/Zakat (Previous Employer)||52||TP Section||(-)||-||-||Yes||-||-||-|
|Employee SOCSO (Previous Employer)||53||TP Section||(-)||-||-||Yes||-||-||-|
Year 2020 - TP1 Settings in Quick PAY:
|Affects PCB wages||Ceiling|
|TP1.01||MEDICAL EXPENSES OF OWN PARENTS||30||(-)||Pelepasan||C1||Yes||RM -5,000|
|TP1.01A||PARENTAL CARE (MOTHER)||30||(-)||Pelepasan||C1B(i)||Yes||RM -1,500|
|TP1.01B||PARENTAL CARE (FATHER)||30||(-)||Pelepasan||C1B(ii)||Yes||RM -1,500|
|TP1.02||BASIC SUPPORTING EQUIPMENT||30||(-)||Pelepasan||C2||Yes||RM -6,000|
|TP1.04||HIGHER EDUCATION FEES (SELF)||30||(-)||Pelepasan||C3||Yes||RM -7,000|
|TP1.05/06||MEDICAL ON DISEASES & CHECKUP||30||(-)||Pelepasan||C4/C5||Yes||RM -6,000|
|TP1.09||SKIM PINJAMAN PENDIDIKAN NASIONAL (SSPN)||30||(-)||Pelepasan||C6||Yes||RM -8,000|
|TP1.11||PAYMENT OF ALIMONY TO FORMER WIFE||30||(-)||Pelepasan||C7||Yes||RM -4,000|
|TP1.13||LIFE INSURANCE||30||(-)||Pelepasan||C8||Yes||RM -3,000|
|TP1.14||EDUCATION & MEDICAL INSURANCE||30||(-)||Pelepasan||C9||Yes||RM -3,000|
|TP1.15||ANNUITY PREMIUM||30||(-)||Pelepasan||C10||Yes||RM -3,000|
|TP1.18||EMPLOYEE SOCSO CONTRIBUTION||30||(-)||Pelepasan||C11||Yes||RM -250|
|TP1.20||PURCHASE OF BREASTFEEDING EQUIPMENT||30||(-)||Pelepasan||C13||Yes||RM -1,000|
|TP1.21||FEES PAID TO CHILDCARE / KINDERGARTENS||30||(-)||Pelepasan||C14||Yes||RM -2,000|
|TP1.ZAKAT||ZAKAT REBATE FROM TP1 FORM||0||(-)||TP1 Zakat||D1||No||N/A|
|T.DI||DISABLED PERSON||30||(-)||Pelepasan||Yes||RM -6000|
|T.DS||DISABLED HUSBAND/WIFE||30||(-)||Pelepasan||Yes||RM -3,500|
* Entry Value: (+) accepts positive amount only. (-) accepts negative amount only.
* CP8A Form: Items will be shown in CP8A Government form
* Affects PCB Wages: Items will be used for PCB calculation
* Payment to EPF Board: Items will be considered as EPF amount and submitted as EPF contribution
* Payment to LHDN Board: Items will be considered as PCB amount and submitted as PCB contribution
How Quick Pay calculates PCB
QUICK PAY complies with LHDN latest PCB computation and is capable of calculating employee monthly tax accurately.
Types of taxable payroll items supported by QUICK PAY are:
1. normal payroll ie. basic, NPL, overtime, shift, additional pay, bonuses, etc
2. perquisite (semi-tax payroll items)
3. benefit-in-kind (TP2)
4. personal tax waiveable claims (TP1)STEP#1: Enter employee normal payroll items into SALARY ENTRY section
STEP#2: If required, enter employee personal expenses into SALARY ENTRY ==> TP SECTION
Picture 1.1 and Picture 1.2 show examples of employee receiving :-
1. bonus of RM 1000
2. petrol claim (perquisite item with tax free limit up to RM 2,400)
3. personal tax reduction expenses such as Life Insurance, parent medical and book purchases
Picture#1.1: SALARY ENTRY with normal payroll itemsBelow example of basic RM 5,000, taxable bonus RM 1,000 and Perquisite Petrol RM 500.
Picture#1.2: SALARY ENTRY with TP1/TP2 items.Below example of employee making claims for Personal Tax waive-able of Life Insurance RM -200, Parent Medical fee paid RM -300 and Book Purchase RM -50. Personal Tax relief items are entered with Negative amount.
Note: SALARY ==> TP SECTION is to enter employee personal expenses (such as book purchases, parent medical bills, life insurance premiums). TP SECTION items will affect PCB calculation. LHDN has not made it compulsory to include employee personal expenses into existing PCB calculation.
Click on button RECALC to view PCB calculation. A popup window will appear showing summary on items being used to derive the final PCB amount. Detail of all perquisite and TP1 items breakdown are also shown.
Setup PCB in Quick Pay
To apply PCB feature, follow below instructions:
1. Goto EMPLOYEE MASTER and assign the correct PCB GROUP (eg. Spouse Working with 2 kids).
2. Goto SYSTEM SETUP and setup CP8A position for overtime, shift, additional pay and allowance/deduction items. Quick Pay uses CP8A position settings to detect taxation type.
3. If perquisite items are being used, set "Tax Exempted Amount".
Amount above "Tax Exempted Amount" value will be taxable. Below is an example showing PETROL & TOLL allowance with exempted amount of RM 6000. So, if employee receives year-to-date total of RM 7000, then only RM 1000 is taxable.
Warning: Perquisite items might increase final PCB amount.
4. If personal tax waiveable items are being used, set the deduction item with CP8A = 30.
TP1 items will reduce PCB wages and is entered as negative amount into SALARY ENTRY ==> TP Section. Each TP1 item has a ceiling amount allowed by LHDN. Only amount below "Maximum tax waiveable amount" will affect PCB wages.
Warning: TP1 items might reduce final PCB amount.
Previous Employer Payroll Entry
Newly joined employees who has worked in other companies during early months of the year are required to have "opening balances" for payroll items in QUICK PAY.
The following opening balances are required to be entered into SALARY ENTRY ==> TP SECTION :
(You may choose to enter these payroll items into current month, or previous payroll periods)
1. Taxable income from Previous Employer, must be declared as CP8A(50)
2. Employee paid EPF from Previous Employer, must be declared as CP8A(51)
3. Employee paid PCB from Previous Employer, must be declared as CP8A(52)
4. Employee paid SOCSO from Previous Employer, must be declared as CP8A(53)
According to LHDN, employer’s responsibilities under the Rules to inform every employee to submit TP 3 (Previous employment remuneration information) form if employee commence employment with new employer and received remuneration from previous employer. Employer shall include TP 3 form information received from employee to input in their payroll system to deduct the Monthly Tax Deduction (MTD) from the remuneration of employee accordance to computerized calculation method and pay it to the Director General.
"Borang PCB/TP3" is required to fill up in (2)copies by employee and (1) copy is keep by employer for (7) years for LHDN Audit purposes. The form is available at Quick Pay > Whats'new? > Government Forms
About Personal Tax Waiveable Claims (TP1)
Q) What are "Personal Tax Waiveable items" (TP1) ?
TP1 items are personal tax waiveable items such as parent medical, purchase of books, medical and education insurance. TP1 item has ceiling amount determined by LHDN - eg. medical ceiling is RM 5,000, books ceiling is 1,000 and computers ceiling is RM 3,000. TP1 ceiling amount changes every year; so it is important to make these changes into TABLE OF CODES.
Q) Where do we enter TP1 items in SALARY ENTRY ?
TP1 items are entered into SALARY ENTRY ==> TP SECTION. These items are entered as Negative value (eg. BOOKS = RM -100). You may enter these items as lump sum or monthly basis. TP1 items will reduce will reduce employee monthly PCB contribution.
Q) Are TP1 items compulsory ?
NO ! It is optional for employers to include TP1 items into monthly payroll for PCB calculation.
Q) What are Perquisite payroll items ?
Perquisites are semi-taxable allowances/benefits. Perquisites will not contribute to PCB Wages unless the amount exceeded "Maximum tax waiveable amount". Employee will ONLY be taxed on the exceeded amount.
Eg. Employee receives annual petrol allowances of RM 3,000. Petrol perquisite of first RM 2,400 (refer LHDN max waiveable amount for year 2009) is tax free; while the balance of RM 600 is taxable. So, employee's petrol perquisite taxable is RM 600; thus, will be included into PCB wages.
Q) Where do we enter Perquisite items in SALARY ENTRY ?
Perquisite items are entered into SALARY ENTRY ==> SALARY ENTRY or TP SECTION. These items are entered as Positive values (eg. PETROL CLAIM = RM +1,000). Perquisite items might increase year-to-date PCB wages and is expected to increase employee monthly PCB contribution.
Declaring PERQUISITE items in TABLE OF CODES (based on LHDN ruling for year 2009):
|Code||Description||CP8A Position||Ceiling Amount|
|PQ.AWARD||SERVICE AWARD||3||RM +2,000|
|PQ.PETROL1||PETROL (OFF-DUTY)||3||RM +2,400|
|PQ.PETROL2||PETROL & TOLL (ON-DUTY)||3||RM +6,000|
|PQ.CHILD||CHILDCARE BENEFIT||3||RM +2,400|
|PQ.GOODS||EMPLOYER PRODUCTS & DISCOUNTS||3||RM +1,000|
|PQ.TRIPS||OVERSEA TRIPS||15||RM +3,000|
Frequently asked Questions (FAQ)
Q) Can we still use manual PCB table ?NO! Employers using computerized payroll software MUST use computerized formula.
Q) What are the common mistakes while setting up PCB ?
No opening balances in previous month data !
For PCB to work, please create "opening balances" when employee newly joined your company.
Q) How do I verify if Quick Pay is contributing the correct PCB figure ?Visit LHDN website (http://www.hasil.gov.my) and choose PCB Calculator to compare results from both systems.
Q) When employee has additional wages (ie. "Saraan Tambahan") such as bonuses, I realized the PCB generated differed significantly ?The new PCB formula calculates monthly PCB differently when additional wages (eg. bonus, overtime, etc) are detected. You should expect very different results.
Q) I have entered TP1 items into SALARY ENTRY ==> TP SECTION but PCB calculated does not reflect much changes ?PCB formula uses TP1 to reduce Year-to-Date taxable wages; and then only re-calculate PCB for the month. You might not see much differences on PCB of the month. However, PCB is reduced through out the future months.
Q) Some employees paid Zakat or Foreigner Fee. Will PCB of the month be reduced ?YES ! Zakat and Foreigner fee deducted in the current month will fully knock-off with the calculated PCB.
Q) What if previous months PCB was incorrect. Will PCB formula perform correction or adjustments in future months payroll processing ?YES ! PCB formula will make necessary PCB adjustments in future months.
Q) Should I lock completed payroll months ?YES ! Please "lock" completed payroll months to avoid accidental re-calculation of PCB of previous months.
Q) Can I disable items from being taxable in PCB but still want to assign a CP8A position for EA Form purpose ?NO ! However, you can assign CP8A position "after" the entire payroll for the year has been completed and locked.