HR Related Regulatory Requirements - LHDN
|1.|| What is STD / PCB? |
Schedular Tax Deduction (STD or PCB) which was introduced in 1st January 1995, is a system of tax recovery where employers make deductions from their employees' remuneration every month in accordance with a Schedule. This is mandatory, in that neither the employer nor employee has any choice in the matter. Any deviation from the requirements of the Income Tax (Deduction from Remuneration) Rules 1994 can only be upon written authorization from the Board.
|2.|| How does STD differ from CP38 deduction? |
As explained in above, STD is an automatic deduction made every month, while CP 38 deduction arise only when the Board issues a specific direction to the employer requiring him to make deductions of certain amounts for specified months. Such CP 38 deductions are generally towards settlement of outstanding taxes while STD is on current income (PAY AS YOU EARN)
|3.|| Can STD be remitted through tapes or diskettes? |
This form of remitting STD is allowed; in fact employers having more than 20 employees are encouraged to submit their STD payments through tapes or diskettes because in this way, processing can be achieved faster and there would be no mistakes in transcribing the details into IRBM's computer system. However, whatever mode of remittance that may be used, employers are reminded that they should furnish complete and accurate particulars of all employees so as to avoid delay in crediting the deductions to the respective individual accounts.
|4.|| What are the payments liable to STD? |
STD is due only on employment income, i.e., on remuneration that arises from a master servant relationship, and this includes all payment other than benefits-in-kind [Section 13(1)(b)], accommodation benefits [Section 13(1)(c)] and reimbursements. Employment income subject to STD includes salary, wages, commission, overtime, allowances, director' fees, tips and bonuses arising out of exercising the employment. The employer adds up such income, subtracts the employee's EPF contribution (subject to a maximum of RM416. per month or RM 5000 per year), and deducts the STD in accordance with the relevant category in the Schedule that the employee comes under. However, where the payment is bonus or other lump sum amount, a special formula has to be adopted to determine the STD.
|5.|| Please explain how Form CP159 is to be completed? |
The Form CP 159 issued to employers forms part of the Form E and the employer is required to show in it details of remuneration and deduction made in each month of the relevant year. The Form CP 159 is a statement of fact; it shows, among other things, the total remuneration paid and the STD deducted therefrom in each of the given months notwithstanding the basis year to which the payment refers. E.g. Bonus for 2000 is paid in February 2001. This will not feature in the CP 159 for 2000 in spite of being payable for 2000. It will only be stated in the CP 159 for 2001, as it was actually paid in 2001.
THE FORM CP 159 IS TO BE COMPLETED IN DUPLICATE. [Refer to Statement Of Tax Deductions Under Income Tax (Deduction From Remuneration) Rules 1994 - Form CP159]
|6.|| How to calculate the STD for director's fees? |
In cases where the Director's Fees is paid monthly together with other monthly remuneration, both the relevant amounts must be added together in order to determine the STD.
For cases where only Director's Fees is paid monthly, the STD is determined in the usual manner.
Where a director is paid a monthly remuneration and he receives Director's Fees in a lump sum, the STD is calculated by using the Bonus Formula. In instances where the director receives only Director's Fees and paid in a lump sum, the relevant amount is divided by the number of months for which the payment relates. STD is determined accordingly and then multiplied by the number of months in question. E.g. A director receives annual Director's Fee of RM36,000.00, without any other remuneration. Therefore the amount applicable per month is RM3,000.00 (RM36,000.00 / 12). The STD for RM3,000 is determined and then multiplied by 12.
|7.|| What reference number should be used if the employee has two or more reference number as, for example, in the case of a married woman? |
In the case of a married women, quote the husband's reference number but ensure that the wife's code is stated. For other cases, contact the nearest IRBM's branch for assistance.
|8.|| Remittance of an amount in excess of that stated in the deduction table has been discovered? Can an adjustment be made in the following month's deduction? |
An adjustment is acceptable provided a covering letter explaining the position is sent together with the adjusted deduction. Adjustments are not allowed for different years, for example, an error relating to the deduction in December 1999 cannot be rectified by an adjustment in the deduction made in January 2000. It is advised that you seek assistance from the nearest IRB Branch before making any adjustments.
|9.|| An employee is about to cease working. Are tax deductions still required? |
Yes. In addition to complying with the monthly tax deduction, the following must also be complied with if that employee is known to be retiring from employment:
|10.|| If a direction to employer to deduct tax (Form CP38) is received by the employer in respect of one of his employees, will the employer still have to deduct tax under the schedular tax deduction scheme? |
Yes, the Direction To Employer To Deduct Tax (Form CP 38) will be issued for the purpose of recovering outstanding tax only.
|11.|| How to notify the new employee? |
The employer must notify the nearest assessment branch within one month from the date of commencement of employment of an individual who is subject to or may subject to income tax using Form CP22. Failure to notify IRBM will render an employer liable to prosecution and on conviction, liable to a fine of not less than RM200 and not more than RM2, 000 or to imprisonment for a term not exceeding six months or to both. The employer also be responsible for any tax due from the above mentioned employee.
|12.|| What is Yearly Remuneration Statement (EA/EC Form) |
Refer to Section 83(1A), Income Tax Act 1967, with effect from year of assessment 2009, every employer shall, for each year, prepare and render to his employee statement of remuneration of that employee on or before the last day of February in the year immediately following the first mentioned year.
Forms to be used: