PCB deductions used to be a simple tax collection process imposed by the IRB. How much is your income for a month, follow the table provided by the IRB, follow the amount of estimated income tax payable and that amount is deducted from your monthly salary and remitted to the IRB.
At the end of the year, you receive the Borang EA from your employer and you calculate how much actual tax you have to pay, taking into account the relieves you have, claims, exemptions, rebates, etc and you fill up the Borang BE, send to the IRB and pay the difference between your actual tax and the total PCB deducted for the year.
If your total PCB deducted for the year is higher, then you get a refund from the IRB.
However, things get really complicated since January 2009. The PCB table is changed, calculation of PCB become totally impossible without a payroll software, TP1, TP2, etc.
Why has the PCB turned into something so complicated ?
The reason is this: The Malaysia IRB wishes to follow its counterpart is Singapore in implementing a system where all salaried employees will not have to file their tax returns (Borang BE) in future.
Refer to the Singapore’s Straits Times report on 7 May 2009 below.
http://www.straitstimes.com/Breaking%2BNews/Singapore/Story/STIStory_373767.html
The system will make the PCB a Final Tax, as opposed to an Estimated Tax as at now.
We are in the first year that the IRB is gearing towards this system. That is why there are so many teething problems and adjustments needed. How long more before the IRB can fully implement the Final Tax via PCB system is yet to be seen.
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I found your website througha search engine and would like to commend you on a very informative and clearly set out write up on tax situations in Malaysia. I hope you will keep this up. Regarding the STD/PCB, are there situations (in case of one off bonus or stock options) when the employer can opt out of deducting STD/PBD and let the employee be responsible for such tax declarations and payments?
ReplyDeleteThe purpose of PCB is to make sure that tax are collected from taxpayers in a PAYE (pay as you earn) manner. Therefore, the responsibility is placed on the employer to deduct PCB. There is no option for the employers not to follow the PCB. It defeats the whole purpose of PCB.
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