Malaysia CP500 Penalty Concession for Employment Income
The Inland Revenue Board of Malaysia (“IRBM”) has announced, via a HASiL Media Release on 5 January 2026, a concession for CP500 Instalment Payment Notices for the Year of Assessment (“YA”) 2026. The concession provides relief from penalties for individual taxpayers, particularly during a transitional period for those with both employment and non-employment income.
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Form CP500
Form CP500 is an Instalment Payment Notice issued by the IRBM to individual taxpayers who receive income other than employment income, such as business income, rental income or royalties.
The instalment tax payable under Form CP500 is divided into six instalments. The first is due in March of the current year and the final instalment is due in January of the following year. Taxpayers are required to settle each instalment by the respective due dates as stated in the CP500 notice.
Failure to remit instalment payment within the prescribed due date will result in a late payment penalty of 10%, which is imposed automatically by IRBM.
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Scope of the Concession
For YA2026, individual taxpayers who receive CP500 notices will not be subject to penalties for non-payment of CP500 instalments. This concession applies to taxpayers with employment income as well as those with additional non-employment income.
Taxpayers who derive income solely from employment are not required to comply with CP500 instalment payments during this period. However, accurate reporting of income in the Income Tax Return Form (“ITRF”) remains necessary to avoid future issuance of CP500.
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Penalty Not Imposed During Concession
During the concession period, no penalties will be imposed for unpaid CP500 instalments. Taxpayers are encouraged to voluntary remit instalment payments to reduce the balance of tax payable upon submission of their ITRF.
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CP500 Revisions
Taxpayers who wish to revise their estimated tax payable for YA2026 may submit Form CP502 by the prescribed deadlines as stated below:
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First revision – on or before 30 June 2026
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Second revision – on or before 31 October 2026.
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Revision of CP500 is optional.
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Conclusion
The CP500 penalty concession for YA2026 provides temporary relief and flexibility for individual taxpayers during the transition. Taxpayers should ensure accurate income reporting and assess whether voluntary payments or instalment revisions are appropriate to effectively manage their tax obligations.
For further information, please visit the official website of the Inland Revenue Board of Malaysia at
https://www.hasil.gov.my/en
KAIZEN Group, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professional accountants in Kaizen for further clarification.
KNOWLEDGE
