What is CP38?
CP38 is an additional tax deduction order issued by LHDN specifically to an employer. Employers will usually receive this directive from LHDN to make additional monthly deductions ('CP38') from the salary of an employee, on top of the usual monthly PCB/MTD amounts.
This CP38 amount is meant to clear the balance of tax liability that exceeds the monthly PCB/MTD amounts already being deducted from the employee.
Employees are able to settle their income tax arrears in installments using the additional CP38 deductions from their salaries in Talenox.
How to include CP38 deduction in Payroll?
You can include a CP38 tax deduction order through these simple steps:
When processing payroll for the employee, head to Step 3 - Select Pay Item > Ad Hoc Payment/Deduction tab.
Choose the "CP38 Tax Deduction Order" pay item in the system and key in the additional amount that you are required to deduct from the employee's salary. Key in any Remarks if needed as well.
How is the CP38 deduction is displayed in Employee Payslips and Payroll Reports?
In payslips, CP38 deduction will be split from the monthly PCB/MTD amounts. These 2 items will be reported as separate amounts in payslips as seen here:
Similar to payslips, CP38 deduction amounts will be separately reported in the Payroll YTD Report generated in the system as seen below:
How are CP38 amounts reflected in Form EA?
Once CP38 deductions are processed in payroll for an employee, the amounts will be synced over to the Form EA generated in Talenox.
It will be displayed separately from PCB/MTD amounts under Section D2: