Estimate of Tax Payable in Malaysia

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Estimate of Tax Payable in Malaysia

Form CP204

With effect from Y/A 2008, where a SME first commences operations in a year of assessment, the SME is not required to furnish an estimate of tax payable or make instalment payments for a period of two years beginning from the year of assessment in which the SME commences operations.

With effect from Y/A 2014, where the SME which commences operations has no basis period for that year of assessment and for the immediate following year of assessment, the SME is not required to furnish an estimate of tax payable for that year and for the immediate 2 following years of assessment.

Under the self assessment system, every company is required to determine and submit in a prescribed form (Form CP204) an estimate of its tax payable for a year of assessment, 30 days before the beginning of the basis period. However, when a company first commences operations (i.e. during the first basis period), the estimate of tax payable must be submitted to the IRB within three months from the date of commencement of its business and thereafter no later than 30 days before the beginning of the basis period.

For example, for the company financial period is 1 January 2024 to 31 December 2024, the CP204 must be submitted before 30 November 2023.

For companies which first commence operations, the company must submit CP 204 within 3 months from date of commencement of operations only if the basis period for that year is not less than 6 months

A SME is defined as a company resident in Malaysia which has a paid up capital of ordinary shares of RM2.5 million or less at the beginning of the basis period of a YA provided:

1. not more than fifty per cent of the paid up capital in respect of ordinary shares of the company is directly or indirectly owned by a related company;
2. not more than fifty per cent of the paid up capital in respect of ordinary shares of the related company is directly or indirectly owned by the first mentioned company; or
3. not more than fifty per cent of the paid up capital in respect of ordinary shares of the first mentioned company and the related company is directly or indirectly owned by another company.
4. Not more than twenty per cent of the paid-up capital in respect of ordinary shares of the company at the beginning of the basis period for a year of assessment is directly or indirectly owned by one or more companies incorporated outside Malaysia or by one or more individuals who are not citizens of Malaysia.

A “related company” in this context means a company which has a paid up capital in respect of ordinary shares of more than RM2.5 million at the beginning of the basis period for a YA.

Kindly remind that the estimate of tax payable for a year of assessment shall not be less than (or at least 85% of) the revised estimate of tax payable for the immediately preceding year of assessment or if no revised estimate is furnished, the estimate of tax payable for the immediately preceding year of assessment.

Submission of revised estimate of tax payable – CP 204A

The Company can submit the CP 204A to revise the estimate of tax payable in the sixth or/and ninth month of the basis period.

Kindly remind that where the tax payable for a particular year of assessment exceeds the estimate of tax payable, by an amount of more than thirty per cent (30%) of the tax payable under the final assessment, then, without any further notice being served, the difference between that amount and thirty per cent (30%) of the tax payable under the final assessment shall be increased by a sum equal to ten per cent (10%) of the amount of that difference, and that sum shall be recoverable as if it were tax due and payable under this Act.

If there is no estimate is furnished by a company, such final tax payable shall without any further notice be increased by a sum equal to ten per cent of the tax payable and that sum shall be recoverable as if it were tax due and payable under the Income Tax Act.

Difference between the estimate submitted and final tax payable

When the tax payable for a particular year of assessment exceeds the original or the revised estimate (if a revision is submitted) by an amount exceeding 30% of the tax payable, the difference will be subject to a penalty of 10%.

Eg. Final Tax payable = RM 1,000,000, ETP = RM 300,000

Failure to furnish estimate of tax payable

Any company which, without reasonable excuse fails to submit the estimate of tax payable for a year of assessment shall be guilty of an offence and upon conviction, be liable to a fine ranging from RM200 to RM20,000 or face imprisonment for a term not exceeding six months or both.

With effect from Y/A 2011, where no prosecution is instituted by the Director General and no direction is issued by the Director General but there is a tax payable by that company for that year of assessment, such amount of tax payable will be subject to a penalty of 10%.