Which Form Should I File — Form B or Form BE? Get It Wrong, You May Receive CP500 Next Year

 

Filing season for Year of Assessment (YA ) 2025 is here, and choosing between Form B and Form BE is causing real confusion. If you pick the wrong form or classify your income incorrectly, LHDN might issue an unexpected CP500 instalment notice. Many pure salary earners received these notices recently — and it caught them off guard.

LHDN has clarified that CP500 notices are meant for individuals with non-employment income. If you only earn a salary, you do not need to pay CP500 instalments. The government also announced a penalty-free concession throughout 2026 for CP500 errors. But to avoid future headaches, you must get your YA 2025 filing right.

Form B vs Form BE: What Is the Difference?

Your choice of tax form depends entirely on your income type.

Form BE is for resident individuals who only have employment income. This covers your monthly salary, bonuses, and allowances where PCB (Monthly Tax Deduction) is already deducted by your employer. Passive rental income under Section 4(d) can also be reported on Form BE. The statutory deadline is 30 April 2026, with an additional 15-day grace period until 15 May 2026 for e-filing.

Form B is for resident individuals who carry on a business. You need Form B if you are a sole proprietor, partner, freelancer, online seller, or commission agent. Rental income is treated as business income under Section 4(a) only if the property is actively managed with comprehensive support services such as cleaning, security, and maintenance. If your rental is just passive income, it falls under Section 4(d) and can go on Form BE. The statutory deadline for Form B is 30 June 2026, with an additional 15-day grace period until 15 July 2026 for e-filing. Manual filing for Form B is no longer allowed from YA 2024 onwards.

Both forms share the same YA 2025 changes, such as the new 2% dividend tax on dividend income exceeding RM100,000 and updated tax reliefs. You choose the form based on how you earn your money, not the reliefs you claim.

	Form BE	Form B
Who	Salary earners only	Business owners, freelancers, sole proprietors
Income type	Employment income, passive rental S.4(d)	Business income, actively managed rental S.4(a)
PCB	Already deducted by employer	No PCB on business income
Statutory deadline	30 April 2026	30 June 2026
E-filing grace period	15 May 2026	15 July 2026
Manual filing	Available	Not allowed (from YA 2024)

Why Did Pure Salary Earners Get CP500 Notices?

LHDN issues CP500 notices based on your previous year's tax return. The system targets people with non-employment income where no PCB is deducted. So why did employees get them?

On 31 December 2025, LHDN issued a statement confirming that many employees received CP500 because their previous Form BE contained errors. The common mistake: keying bonuses or allowances under "other income" instead of employment income. Some taxpayers also declared one-off side income in the wrong category, causing the LHDN system to treat it as recurring business income.

When the system sees "other income," it assumes you have non-employment earnings and automatically generates a CP500 instalment schedule for the following year.

What to Do If You Received CP500 by Mistake

If you truly have employment income only, LHDN has confirmed you do not need to comply with the CP500 instructions. There is a penalty-free concession throughout 2026, so you will not face fines for missing these payments.

But you must correct your record. Submit Form CP502 (Application for Amendment of Instalment Payments) together with your EA form and a brief explanation to the CP500 Help Desk at mejabantuanCP500@hasil.gov.my. You can also submit via the LHDN portal.

The CP502 amendment deadlines are 30 June 2026 for the first revision and 31 October 2026 for the second revision.

If you actually do have non-employment income — like actively managed rental under Section 4(a) or freelance earnings — CP500 is a valid prepayment mechanism. While penalties are waived for 2026, unpaid instalments can attract penalties after the concession period ends. LHDN encourages voluntary payments to reduce your final tax bill when you file your return.

Practical Steps to Avoid CP500 Surprises

Here is how you can prevent this issue when filing your YA 2025 taxes.

1. Confirm whether you have business income. Ask yourself: do you run any side business, even a small one — online sales, freelance work, consultancy, commissions, or content creation? Is your rental income actively managed as a business under Section 4(a) with support services like cleaning, security, and maintenance? If your rental is just passive income under Section 4(d), it can go on Form BE. When in doubt, seek professional advice.

2. Follow LHDN working sheets for employment income. For Form BE, LHDN provides the HK-2 working sheet for employment income. It covers salary, wages, leave pay, overtime, fees, commissions, bonuses, perquisites, awards, and allowances. Complete HK-2 first and transfer the total to the employment income line in Form BE. This reduces the risk of accidentally entering bonuses or allowances under the wrong item such as "other gains or profits."

3. Use the correct lines for dividends, interest, and other investment income. These items have their own dedicated lines in Form BE and Form B. Do not lump them together with employment income or put employment-type items into these boxes.

4. Keep proper documentation for seven years. The Malaysian tax system relies on self-assessment. You do not submit all supporting documents with your return, but you must keep them for at least seven years. This includes EA forms, business accounts and records (if any), dividend vouchers, rental agreements, and receipts for reliefs and rebates. Good documentation protects you if LHDN raises a query or audit later.

Key Deadlines for YA 2025

Form	Statutory Deadline	E-Filing Grace Period
Form BE	30 April 2026	15 May 2026
Form B	30 June 2026	15 July 2026
CP502 (1st revision)	30 June 2026	—
CP502 (2nd revision)	31 October 2026	—

Need Help?

Contact KS Chia & Associates (AF001828) for professional advice on tax filing and compliance.

WhatsApp us at 011 2366 5233.

RMCD Construction Service Tax Updates 2026: What Malaysian Contractors Must Know

Throughout 2025, the Malaysian government announced several major amendments to how service tax applies to the construction and property development sectors. Now, the Royal Malaysian Customs Department (RMCD) has finally updated their official Guide on Construction Work Services on 17 March 2026 to formally document all these changes in one place.

This 72-page document replaces the outdated June 2025 version. At KS Chia & Associates, we have analysed the updated guide. Here are the key policies you need to apply to your business right now.

1. Residential Units in Mixed Developments Are Exempt

This is the biggest change that was announced last year and is now officially in the guide. RMCD has completely reversed its previous ruling.

Under the old June 2025 guide, the entire contract value for a mixed development (residential + commercial + public facilities) was subject to the 6% service tax. A 25-storey building with 15 residential floors and 10 commercial floors? The whole thing was taxable.

That is no longer the case.

Under the updated March 2026 guide, the residential portion and related public facilities are exempt. Only the non-residential (commercial) built-up area is taxable. Shared public facilities like car parks and lobbies must be split between residential and commercial based on built-up area ratios.

What you need to do:

• Get an architect or surveyor to certify the built-up area apportionment.

• Make sure your construction contract is in writing, signed, and stamped by LHDN.

• The contract must describe the mixed development scope and pricing.

• Keep copies of the planning permission and pre-computation plan.

If you have been paying service tax on the residential portion of mixed developments since July 2025, contact us to discuss possible adjustments.

2. Non-Reviewable Contract Exemption Extended to 30 June 2027

Good news if you signed a construction contract before 1 July 2025.

As announced in late 2025, the government extended the service tax exemption for non-reviewable contracts by one year. The new deadline is 30 June 2027 (previously 30 June 2026).

To qualify, your contract must meet all three conditions:

1. Signed before 1 July 2025.

2. Does not contain a price review clause.

3. Stamped by LHDN before 31 December 2025.

What about Variation Orders?

VOs that do not change the contract value are exempt until 30 June 2026, provided the VO was signed and stamped before the deadlines.

What about Extensions of Time?

EOTs that do not add costs are exempt until 30 June 2027, subject to conditions.

From 1 July 2027, all construction services under these contracts become fully taxable.

3. Your Invoices Could Be Costing You Money

This is a compliance trap that many contractors are not aware of, and the updated guide highlights it clearly.

The March 2026 guide makes it very clear: if your invoice does not separately list building materials and construction services, RMCD will charge the 6% service tax on the entire lump-sum amount.

Here is a simple example. On a RM1 million contract where RM400,000 is materials and RM600,000 is services:

• Lump sum invoice: 6% on RM1,000,000 = RM60,000 in service tax.
• Itemised invoice: 6% on RM600,000 = RM36,000 in service tax.

That is RM24,000 you are throwing away by not itemising your invoices.

The rules are strict:

• Building materials must be stated at actual cost with no mark-up.
• You must keep supplier invoices as supporting documents.
• f you cannot separate goods from services, the entire amount is taxable.

Update your invoicing templates today.

4. B2B Exemption for Design and Build Contracts

Main contractors working under Design and Build contracts can claim B2B exemptions when hiring professional services. This covers architects, engineers, surveyors, lawyers, accountants, and consultants who are registered under Group G.

The planning permission reference number must appear on the consultant's invoice. This is a self-compliance basis — you do not need to apply for approval, but you must keep proper records.

5. Places of Worship — Fully Exempt

Building or renovating a mosque, temple, church, or gurdwara? The construction is fully exempt from service tax, effective 1 July 2025.

But there is a catch. If the development includes commercial buildings (like shop lots) on the same site as the place of worship, the exemption does not apply automatically. You would need to make a separate application to the MOF Tax Division.

Renovation of existing non-residential buildings (shops, offices, warehouses) that are being converted into places of worship is also exempt. But no refund is available for service tax already paid on the original building.

6. Other Changes You Should Know About

Local Authorities (PBT) are no longer exempt. The exemption expired on 30 September 2025. If you provide construction services to PBT, you must charge the 6% service tax. Statutory bodies (EPF, SOCSO, MARA, LHDN, public universities) and GLCs were never exempt.

Repair and maintenance during construction. If maintenance is part of your original construction contract, it falls under Group L at 6%. If it is a separate maintenance contract, it falls under Group G at 8%.

EPCC contracts for ships and platforms. Contractors can choose whether to classify these as construction work (6% service tax, B2B eligible) or manufacturing (sales tax). Pick one and stick with it.

Record keeping. You must keep all records for 7 years from the date of issuance.

Key Dates at a Glance

Get Expert Help

These updated guidelines create real opportunities to save on service tax — but only if you get the compliance right. Wrong invoicing, missing documentation, or incorrect apportionment can cost you.

Our indirect tax team at KS Chia & Associates has been advising construction and property development clients on SST since the expansion took effect. We can help you: •

• Calculate your mixed development apportionment.
• Update your invoicing templates.
• Review your contracts for exemption eligibility.
• Prepare supporting documentation for RMCD audits.

KS Chia & Associates

Chartered Accountants (AF001828)

WhatsApp us: 011 2366 5233

Disclaimer: This article is based on the RMCD Guide on Construction Work Services updated as at 17 March 2026 and related Service Tax Policies. It is for general information only and does not constitute formal tax advice. Please consult a qualified tax professional for advice specific to your situation.