Effective from 1 January 1995, a new system of tax recovery known as Schedular Tax Deduction (STD) was introduced.

Employers are required to make deductions from their employees remuneration every month in accordance with a Schedule as prescribed by the Income Tax (Deduction from Remuneration) Rules 1994 ["The Rules"].

Every employer shall pay to the Director General, not later than the 10th. day of every calendar month, the total amount of tax deducted or that should have been deducted by him from remuneration of employees during the preceding calendar month.
Such payments must be remitted together with Form CP 39 or a return setting out the names, identity card numbers or if none, passport numbers, and tax reference numbers of those employees from whose remuneration he has or should have made deductions.

Under the Rules, an employer is required to:

Make the appropriate monthly tax deductions from the remuneration of employees (Refer to Rule 3);

Complete the Statement of Tax Deductions by Employer (Form CP 39); and

Submit Form CP 39 together with the amount deducted or that should have been deducted to the Inland Revenue by the 10th day of the following month. (Refer to Rule 10(1) ). Penalties may be imposed in the event of failure (Rule 17).

Within thirty days after the end of each calendar year, give to every employee from whose remuneration deductions in respect of tax have been made, a statement stating the total remuneration for the calendar year in question and the total amount of deductions made during that year. [Refer to Rule 10(3)].

Not later than the 10th day after the cessation of payment of remuneration, inform the Director General accordingly and furnish in respect of the employee the following particulars:

a) the name, identity card number or if none, the passport number and the last known address of the employee;

b) the tax reference number of the employee;

c) the date of cessation of the payment of remuneration;

d) the total amount of tax deducted during the deduction period in which the payment of remuneration ceased; and

e) the total amount of remuneration paid or payable to the employee from the 1st January of the year of cessation up to and including the date of cessation of the payment of remuneration. (Refer to Rule 13).

Note:
A new employer is required to register itself at the nearest IRB branch before effecting any STD payments.

The Schedule is available at all branch offices of the Inland Revenue Board. This is the Schedule with reference to which deductions from employees' remuneration are made.

• Categories of Employees
• Calculation of Tax Deduction To Be Made
• Deductions From Lump Sum Payments (Bonus, Arrears, Etc.)
• Deductions From Payments of Compensation For Loss of Employment

To facilitate posting of the tax deductions to the relevant accounts, it is imperative that all particulars are correctly stated in Form CP 39.

Information Regarding Employer

Employer's reference number;
Employer's full name and address;
The month to which the payment relates.

Information Regarding Employees

Income tax reference number;
Full name as it appears on his identity card
(or passport in the case of a foreigner);
Old and new identity card number,
or passport number in the case of a foreigner;
Country of origin for foreign nationals

For the purpose of forwarding the above information, the use of electronic media such as diskette, cartridge or tape is encouraged. For this purpose Inland Revenue Board has developed its own STD software which is available free of charge. Kindly contact STD Unit, Collection Branch Kuala Lumpur for further information.
If there are tax deduction under Schedular Tax Deduction and also under Direction To Employer To Deduct Tax (CP 38), only one cheque / bank draft / money order for the aggregate amount needs to be issued.

The cheque / bank draft / money order shall be crossed and made payable to DIRECTOR GENERAL OF INLAND REVENUE. On the reverse side of the cheque / bank draft / money order, the following must be stated clearly:

Employer's reference number;
Employer's full name;
Employer's full address.

Failure to comply with any of the Rules will render an employer liable to prosecution and, if convicted, be liable to a fine not exceeding RM1,000 or imprisonment for a term not exceeding 6 months or to both. (Refer to Rule 17).

"FAILURE TO COMPLY" includes:

• Not remitting the appropriate tax deductions to the Inland Revenue;
• Not remitting the tax deductions by the 10th day of the following month;
• Not deducting and remitting the correct amount;

Form CP 159 is issued together with Form E. This Form is used for reporting the remuneration paid and the tax deduction made in each particular month of a calendar year.

Form CP 159 is divided into five columns as follows:

The following must also be noted:

The business address to be shown is the street address and not the Post Box address.

The date on which the financial year ends is the date on which the annual accounts are closed. It must be noted that the Form CP 159 requires information for the calendar year ended 31st December.

The income tax reference number refers to the assessment file number.

Form CP 159 is to be completed and returned to the Inland Revenue together with Form E (Employer's Return) at the beginning of the year.