CP38 vs PCB (CP39) in Malaysia: Key Differences Every Employer Should Know

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Published On: 07/10/2025By yunice

When it comes to employee income tax deductions in Malaysia, many employers and HR professionals often confuse CP38 with PCB (Potongan Cukai Bulanan) — also known as MTD (Monthly Tax Deduction).
Although both involve salary deductions for tax purposes, they actually serve different functions and apply in different situations.

Understanding these differences is essential for every employer to stay compliant with LHDN regulations and ensure payroll accuracy.

What is PCB (CP39 / MTD)?

PCB (Potongan Cukai Bulanan), also referred to as MTD, is the monthly tax deduction employers make from employees’ salaries to prepay their current year’s income tax.

✅ Key points about PCB:

Prepared by: Employer
Submitted to: LHDN every month
Purpose: Covers the employee’s current year income tax
Amount: Based on MTD tax calculation (depends on salary, reliefs, and deductions)
Due date: 15th of every month
Submission method: Through e-PCB or e-Data PCB portal

Essentially, PCB helps employees pay their annual tax progressively each month instead of in one lump sum at the end of the year.

What is CP38?

CP38, on the other hand, is a special deduction instruction issued by LHDN to the employer.
It requires the employer to deduct additional tax from an employee’s salary to cover outstanding tax owed from previous years.

✅ Key points about CP38:

Issued by: LHDN directly to the employer
Purpose: Recover outstanding or underpaid income tax
Amount: Fixed amount determined by LHDN’s schedule
Applies to: Specific employees listed in LHDN’s CP38 instruction
Due date: 15th of every month (same as PCB)
Submission method: Through e-PCB portal

⚠️ Important: CP38 deductions are in addition to the regular PCB deduction.

CP38 vs PCB: A Quick Comparison

Why Employers Need to Understand the Difference

Mixing up CP38 and PCB can lead to:

Incorrect tax deductions
Penalties or late payment issues with LHDN
Confusion during employee tax filing season

As an employer, it’s your responsibility to ensure both PCB and CP38 deductions are:

Accurately calculated
Paid on time
Properly reported to LHDN

Simplify Tax Deductions with Pandahrms

Managing PCB and CP38 manually can be time-consuming — especially when handling multiple employees and deductions.
With Pandahrms, employers can automate payroll calculations, including: