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What is Borang CP38 Deduction and CP38 Form?

by Shaun Wong for Blog Post

CP38 is an additional tax deduction order issued by LHDN specifically to an employer. This CP38 form regulation requires employers to make additional deductions in monthly installments from taxpayers ‘salaries (other than monthly tax deductions) against taxpayers’ income tax arrears.

What is Borang CP38 Deduction and CP38 Form?

What is Borang CP38 Deduction and CP38 Form?

What is Borang CP38?

CP38 Form is an additional tax deduction order issued by LHDN specifically to an employer. This CP38 Form regulation requires employers to make additional deductions in monthly installments from taxpayers ‘salaries (other than monthly tax deductions) against taxpayers’ income tax arrears. Staffs in Malaysia are usually paid twice a month or once a month. Tax deductions are calculated based on the employee’s monthly taxable income. If an employee is paid more often, tax is calculated only at the end of the month when the total mon犀利士
thly taxable income is known. Income tax is deducted by the employer in accordance with the Tax Deduction Chart issued by the Malaysian Internal Revenue Board of Malaysia (IRBM).


Borang CP38 deduction is designed to ease the burden of taxpayers who must pay tax arrears immediately. Taxpayers are given the opportunity to settle their income tax arrears over a period of a few months rather than being burdened with one large deduction. So that it won’t intervene with our cash flow.
The CP38 deduction only occurs when the IRB issues a specific order to the employer requiring him to deduct certain amounts for certain months. These Borang CP38 deductions are typically used to offset unpaid taxes.

How to include BORANG CP38 deduction in QNE Cloud Payroll?

Borang CP38 Deduction is an IRB guideline for employers. The IRB has discovered that you have committed tax fraud. And employers must follow these instructions; otherwise, a claim will be brought against the employer. So, as an employee, you just have to pay. Employees can pay off income tax arrears in installments using the additional CP38 deduction from their salary.

You can add Borang CP38 Deduction in QNE by following these simple steps:

1) Go to Setup > Employees > Employees

2) Click on the CP 38 button

3) Either Search for an employee code or employee name

CP38 Deduction

4) Select the corresponding year and key-in the amount based on the month accordingly.

CP38 Form

5) Click Submit.
** Note: For employee who pays twice a month, CP38 form will be shown in second half payroll.

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Penalties for non-compliance with CP 38

The employer is liable under Rule 17 Income Tax (Withholding From Wages) 1994 if the Rules for MTD are not followed. The following are the type of offenses.

  • Failure to pay the monthly employee tax deduction by the 15th of the following month.
  • Failure to pay the monthly employee tax deduction by the 15th of the following month.
  • Failure to provide complete and accurate employee information.
  • According to this rule, in case of conviction, the employer can be fined not less than 200 and not more than 20,000 RM, as well as imprisonment for not more than six months.

How are Borang CP38 deduction shown on the EA Form?

It will be displayed under Section D2.

borang cp38

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