What is PCB or MTD and what must I deduct from employees' salaries?
PCB (also called MTD) is the monthly tax an employer deducts from an employee's pay and pays to LHDN. LHDN requires the amount to come from its MTD schedule or computerised method and to be remitted by the 15th of the following month.
PCB stands for Potongan Cukai Bulanan; in English it is Monthly Tax Deduction (MTD).
How it works (LHDN employer page):
- Deduct MTD from each employee's remuneration using either LHDN's MTD schedule or its computerised calculation method.
- Remit the total to LHDN on or before the 15th day of the following month.
- Submit the statements through the e-PCB, e-Data PCB or e-CP39 applications on LHDN's portal.
- After the year, report the totals in Form E and give each employee an EA or EC statement by the end of February.
Employee inputs: the calculation uses salary, bonus, benefits and reliefs the employee has declared (for example on a TP1 form).
Employer risks: late remittance can attract a penalty on the amount, and payroll errors can distort the employee's pre-filled tax return.
Directors on payroll: treated like any other employee.
PCB is a prepayment. The employee's final tax is settled when they file their own return, and a refund or extra payment may follow.
Legal basis
- Income Tax Act 1967, s.107
- Income Tax (Deduction from Remuneration) Rules 1994
Sources
Applies to YA 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- Which business expenses can a Malaysian company deduct for tax?An expense is deductible if it is incurred in producing business income, and it is revenue rather than capital in nature. Typical examples are salaries, rent, utilities, interest on business loans, and professional fees. Capital items get capital allowances instead.
- Which expenses are not deductible for tax in Malaysia?Private or domestic expenses, capital expenditure, fines and penalties, income taxes, and goodwill are not deductible. Entertainment of customers and unapproved donations are also restricted. Accounting profit must be adjusted by adding these back.
- Are entertainment expenses tax deductible in Malaysia?Only partly. Business entertainment, such as meals with customers or suppliers, is generally 50% deductible, while entertaining potential customers is not deductible. Entertainment provided purely to your own employees is generally deductible in full.
- How do capital allowances work for equipment and vehicles in Malaysia?Because accounting depreciation is not deductible, a company claims capital allowances on qualifying assets: an initial allowance plus annual allowances. General plant and machinery gets 20% initial and 14% annual, and assets under RM2,000 can be written off in full, up to a total of RM20,000.
- Are there double or extra tax deductions available to Malaysian SMEs?A few exist but they are narrow. Budget 2026 adds an extra 50% deduction for certified AI and cybersecurity training for SMEs, and there is a 200% automation capital allowance on up to RM10 million of qualifying spending until YA 2027.