🚨 LHDN Just Collected RM1.009 Billion From 52,540 Taxpayers. Is Your MyInvois Data Next?

Based on LHDN Press Release: 20 June 2026

On 4 June, we warned you about the RM10,000 e-Invoice threshold.
On 14 May, we shared the 5 Red Flags LHDN looks for.
Today, LHDN just confirmed their "analytical model" is fully operational—and the dragnet is working.

📌 The New Reality: It's Not Just About Revenue

LHDN didn't just catch people under-declaring total sales. They explicitly stated they are using analytics to catch "unusual behavioral patterns" (corak tingkah laku luar kebiasaan).

This means LHDN's AI isn't just checking if your total sales match your Form C. It is analyzing how you invoice:

• 🔴 The timing and frequency of your credit notes
• 🔴 Patterns of transactions hovering just below the RM10,000 threshold
• 🔴 Mismatches between self-billed e-Invoices and your declared ledger

📌 The KS Chia Judgement: The "Voluntary" Window is Closing

LHDN collected RM1.009 billion from 52,540 taxpayers who did "voluntary disclosure."

Here is the reality most directors miss: By the time you get the audit letter, it is no longer voluntary—it's enforcement, and the penalties are maximum. True voluntary disclosure means identifying your own e-Invoice anomalies before LHDN's algorithm flags you.

📌 How We Protect You: The MyInvois Anomaly Stress-Test

A generic accountant will just ask, "Do your sales match your tax return?"

At KS Chia, we run your MyInvois portal data through our proprietary 3-Point Anomaly Stress-Test:

1. The Behavioral Pattern Scan: We check your credit note and cancellation logs to ensure they don't form a "suspicious pattern" to LHDN's AI.
2. The Threshold Proximity Check: We identify if your invoicing workflow is accidentally creating near-RM10,000 transactions that trigger "splitting" flags.
3. The Self-Billed Reconciliation: We cross-match every self-billed e-Invoice issued to you against your ledger to ensure zero blind spots.

✅ Take Action Before Enforcement Begins

LHDN has explicitly advised taxpayers to correct past non-compliance voluntarily immediately.

If you want to know if your company's e-Invoice data is triggering LHDN's analytical model, share your Company TIN with us. We will run a preliminary MyInvois Anomaly Stress-Test and advise you on the exact voluntary disclosure steps required to protect your directors from penalties.

KS Chia & Associates

Chartered Accountants (AF001828)

WhatsApp: 011-2366 5233

Website: kschia.com.my

Based on: LHDN Press Release "E-Invois Perkukuh Pematuhan Cukai" (20 June 2026)

Related posts: "5 Red Flags LHDNM Will See From Your e-Invoice Data" (14 May 2026) | "e-Invoice and the LHDN Means Test: What the RM10,000 Threshold Means for Company Directors" (4 June 2026)

Tags: #MalaysiaTax #eInvoice #LHDN #TaxCompliance #CompanyDirector #MyInvois

e-Invoice and the LHDN Means Test: What the RM10,000 Threshold Means for Company Directors

Malaysia's e-Invoice system has changed how LHDN can build a means test case. Previously, the means test relied primarily on asset accumulation — comparing declared income against properties, vehicles, and company shareholdings. From the e-Invoice era, there is a third data layer: individual transactions above RM10,000 are separately recorded in MyInvois and accessible to LHDN.

This is not a future risk. For Phase 1, 2, and 3 businesses, the RM10,000 threshold is fully operative now.

The RM10,000 Threshold — Phase by Phase

For Phase 1 and Phase 2 businesses, every single transaction above RM10,000 requires an individual validated e-Invoice submitted to MyInvois.

Phase 3 covers businesses with annual turnover above RM5 million to RM25 million, which came under the system from 01/07/2025. Phase 4 — businesses with turnover up to RM5 million — followed on 01/01/2026 and are currently under a relaxation period until 31/12/2027 under Section 16.2(a) of the e-Invoice Specific Guideline Version 4.7.

One important scope note: businesses with annual turnover below RM1 million are fully exempt from e-Invoice implementation. Transactions with exempt sellers do not generate individual e-Invoices regardless of the transaction amount. In practice, the risk is concentrated on purchases from Phase 1–3 sellers — which covers most major luxury goods retailers, hotels, airlines, large contractors, and medical service providers.

Phase 4 businesses are under a relaxation period until 31/12/2027 under e-Invoice Specific Guideline Version 4.7, Section 16.2(a). They may issue consolidated e-Invoices for all transactions including those above RM10,000 until the relaxation period ends. Note, however, that their purchases from Phase 1/2/3 sellers are still individually recorded on the seller's side.

What Becomes Visible

For any sale above RM10,000 by a Phase 1, 2, or 3 business, the individual e-Invoice submitted to MyInvois records: the seller's identity, the buyer's details, the transaction date, the amount, and the nature of goods or services supplied.

For a company director making personal purchases from compliant businesses, this means the following are now individually documented:

• Luxury watches, jewellery, and handbags from compliant retailers
• High-end renovation works or furniture billed as single invoices
• Premium hotel stays invoiced as a single transaction
• Business-class air tickets above RM10,000 per booking
• High-value consumer electronics
• Private medical or dental procedures above RM10,000

How This Strengthens the Means Test

The means test (ujian kemampuan) compares declared income against evidence of lifestyle and wealth accumulation. Before e-Invoice, LHDN built this picture from stock data — what you owned at a point in time, sourced from JPJ, land registries, and company records. The picture required inference: if you own this much, your income must have been at least this high.

From the e-Invoice era, LHDN can also build a flow picture — what you spent on individual transactions above RM10,000 during the year, directly from MyInvois records. The question shifts from what you own to what you spend, with direct transactional evidence rather than inference from asset holdings.

A director who declares RM150,000 in annual income but makes several purchases above RM10,000 each during the year now has that spending pattern individually documented in a system LHDN can query. The means test can be constructed at desk level — no field visit required.

Transaction Splitting — Not a Solution

Splitting a single transaction deliberately to fall below the RM10,000 threshold — for example, converting a RM15,000 purchase into two RM7,500 invoices to route through the consolidated e-Invoice channel — is precisely the type of invoicing anomaly that LHDN's data-matching analytics is designed to detect. Repeated near-threshold transactions from the same seller on the same or adjacent dates will surface as a pattern. This approach is not a workaround — it is an additional compliance risk on top of the underlying income gap.

Three Layers Now

The means test as it stands from the e-Invoice era has three data layers:

1. Assets you own — properties, vehicles, investments, company shareholdings
2. Income you declare — Form B, including dividend income at B8 from YA 2025 onwards
3. Individual spending above RM10,000 — recorded in MyInvois for Phase 1/2/3 transactions

A gap in any one of these three dimensions can be the starting point for a means test assessment. The PKCP ruling in DGEK v. Ketua Pengarah Hasil Dalam Negeri (13/05/2026) showed the consequence when the gap in layer one cannot be explained. From YA 2025, the dividend declaration requirement adds a second detection trigger. The e-Invoice system adds a third.

What Director-Shareholders Should Do

• Review whether declared income — across employment, rental, dividend, and other sources — is consistent with both asset accumulation and individual spending patterns above RM10,000
• Do not participate in or suggest transaction splitting to avoid the RM10,000 threshold
• If you are a Phase 4 business: the relaxation applies to your own e-Invoice obligations until 31/12/2027, but your spending from Phase 1/2/3 sellers is still recorded on their side
• If there is a gap between declared income and lifestyle — both assets and spending — seek advice now, before LHDN assembles the picture independently

Need Help?

If you are concerned about your tax position in light of the means test, dividend tax changes, or e-Invoice developments, contact us.

KS Chia & Associates Chartered Accountants (AF001828)
WhatsApp or call: 011-2366 5233

LHDN Means Test 2026: What Company Directors in Malaysia Must Know About Dividend Income

A Special Commissioners of Income Tax (SCIT) ruling dated 13 May 2026 confirmed that LHDN can raise a best judgment assessment — and a 60% penalty — against a company director using nothing more than a desk audit. No field visit. No prior negotiation. The case, DGEK v. Ketua Pengarah Hasil Dalam Negeri (MOF.PKCP.700-7/1/1759–1762), shows how the means test (ujian kemampuan) works in practice in Malaysia — and why dividend income from your own company is not automatically a safe answer.

What the Means Test Is

The means test is a desk-level tool. LHDN compares what you declare as income against what you visibly own and spend — properties, vehicles, company shareholdings, liabilities, and capital movements. Where the numbers do not add up, LHDN treats the gap as unreported income and raises an additional assessment under s.91(1) of the Income Tax Act 1967 (ITA 1967) using its best judgment.

The notices that trigger this process are CP 101A and CP 102, issued under Sections 78, 79, and 81 of ITA 1967. These are requests for information — but they are also the point at which the direction of an audit is set. How you respond at this stage determines whether an assessment follows.

What Happened in This Case

The taxpayer was a director and shareholder in several companies. He owned land, a residential property, and luxury vehicles. LHDN's means test identified an income shortfall of RM1,721,642 across Year of Assessment (YA) 2015, 2016, 2017, and 2018. An additional assessment was raised on 24/11/2020, together with a 60% penalty under s.113(2) ITA 1967 — bringing the total tax and penalty to RM750,635.94.

The taxpayer filed a Form Q appeal on 21/12/2020, arguing that dividend income of RM4,500,000 received from one of his own companies had not been taken into account in the means test. He submitted a dividend voucher dated 23/03/2015 and journal entries from the paying company as supporting evidence.

PKCP dismissed the appeal. The additional assessments and penalty were upheld in full.

Why the Defence Failed

There were three specific reasons the taxpayer could not displace the assessment.

The dividend was not proven to have been actually received. The legal standard under ITA 1967 requires income to be both accrued and received. A dividend voucher and journal entry show that a dividend was declared in the accounts. They do not prove the taxpayer received the funds. The internal records produced were not sufficient to meet that standard.

The paying company lacked the financial capacity to support the dividend. LHDN reviewed the financial position of the company said to have paid the RM4,500,000 dividend. The company could not support a payment of that size from its financial standing. Documents produced by a company the taxpayer also controls carry limited weight when the company's own accounts tell a different story.

One point worth noting for directors of single-tier companies: single-tier dividend status means the dividend is exempt from further tax in the shareholder's hands. It does not exempt the dividend from scrutiny on whether the paying company had sufficient distributable reserves, or whether the shareholder actually received it. LHDN's capacity challenge in this case applied regardless of the dividend's tax classification.

The argument was raised too late. The dividend income defence was only introduced after the additional assessment had already been issued — through Form Q filed on 21/12/2020. SCIT treated this timing as undermining the credibility of the claim. The correct stage to raise this argument was during the CP 101A and CP 102 response window, before the assessment was formalised.

Under Paragraph 13, Schedule 5 of ITA 1967, the burden of proof rests with the taxpayer to displace the assessment. The SCIT found that the taxpayer had not discharged that burden.

The Broader Risk for Company Directors

LHDN does not rely solely on what you declare. The means test cross-checks whether your financial transactions are commercially consistent with your declared position. Declaring a dividend is one thing. Being able to defend it under LHDN scrutiny is another.

If your declared income does not explain your asset accumulation — properties, vehicles, investments — expect questions. The means test runs at desk level. A field audit is not a prerequisite for an assessment to be raised.

Who Should Be Paying Attention

• Company directors whose visible assets and lifestyle exceed what their declared income can explain
• Business owners who draw dividend income from companies they control, including single-tier dividend arrangements
• Individuals who have received a CP 101A or CP 102 notice from LHDN
• Directors with shareholdings across multiple companies where the overall income picture is complex

What You Should Do

• Do not wait for a notice before organising your records. By the time CP 101A arrives, the assessment window is already open. The means test has already run.
• Dividend income from your own company must be defensible end-to-end. Not just declared in board resolutions, but supported by the company's financial position and consistent when cross-checked independently. The question LHDN asks is not whether a dividend was declared — it is whether the company could have paid it, and whether you received it.
• Respond to CP 101A and CP 102 notices thoroughly and on time. This is your best opportunity to address the gap before an assessment is raised. Incomplete or delayed responses accelerate the assessment process.
• Do not introduce new arguments after the assessment. Arguments raised for the first time through Form Q — after the assessment — carry a credibility burden that is difficult to overcome. The time to present your case is before the assessment, not after.

Editor's Note

The taxpayer has 21 days from the date of the SCIT decision to file a further appeal. SCIT decisions are persuasive but do not constitute binding legal precedent. The ruling reflects SCIT 's application of the means test and the evidentiary standard required under ITA 1967 to displace a best judgment assessment.

Need Help?

If you have received a CP 101A, CP 102, or any LHDN audit notice — or if you are unsure whether your dividend documentation is sufficient to withstand scrutiny — contact us before responding.

KS Chia & Associates Chartered Accountants (AF001828)

WhatsApp or call: 011-2366 5233

Rental Income: Business Source or Non-Business Source? Malaysia High Court Rules in 2026

A High Court decision on 22 April 2026 has clarified a question that affects many Malaysian companies that own and rent out properties: when does rental income qualify as business income under Paragraph 4(a) of the Income Tax Act 1967 (ITA 1967), and when is it simply passive rental income under Paragraph 4(d)? The answer has significant consequences for how expenses are deducted, whether losses can be carried forward, and whether capital allowances are available.

The Case: Glenmarie Estates Sdn Bhd v Director General of Inland Revenue

Glenmarie Estates Sdn Bhd, a non-listed investment holding company, owns 14 properties that were rented out. The company took the position that its rental income was taxable as business income under Paragraph 4(a). LHDN disagreed and raised additional assessments for financial years 2015, 2016, and 2017 on the basis that the income was non-business rental under Paragraph 4(d).

The Special Commissioners of Income Tax dismissed the taxpayer's appeal on 14/07/2023. The company brought the matter to the High Court of Kuala Lumpur, which dismissed the appeal again on 22/04/2026, with costs awarded to LHDN.

The Legal Test: What Does "Comprehensive and Active" Mean?

Under Public Ruling No. 12/2018 (Income from Letting of Real Property), rental income is treated as a business source under Paragraph 4(a) only if the owner provides maintenance or support services that are both comprehensive and active.

Comprehensive means covering all general upkeep of the property — structural elements, common areas, stairways, lobbies, lifts, car parks, drains, landscape, exterior fittings. Providing security services alone does not meet this standard.

Active means the owner proactively ensures these services are delivered — either directly or through appointed contractors — as an ongoing obligation. Services that are only provided when tenants make a request or complaint do not qualify.

In this case, the court found that the tenancy agreements did not require the company to provide comprehensive maintenance. The evidence showed services were provided reactively — upon request or complaint only. This was insufficient to satisfy the test in PR 12/2018.

The Investment Holding Company Dimension: Section 60F ITA 1967

Because Glenmarie Estates is a non-listed investment holding company (IHC), Section 60F ITA 1967 applies. Under Section 60F, income derived from investments — including rent — is treated as income from a non-business source. This reinforced LHDN's position that the correct treatment is Paragraph 4(d).

If your company is structured as an IHC and rents out properties, the threshold to qualify for Paragraph 4(a) is higher, and the risk of misclassification is greater.

What About PR 12/2018 Applying to Pre-2018 Years?

The taxpayer argued that PR 12/2018, published on 19/12/2018, should not apply to financial years 2015, 2016, and 2017. The court rejected this. PR 12/2018 replaced Public Ruling No. 4/2011, which had been in force since 10/03/2011. The same guidance on the comprehensive-and-active test existed throughout the years under assessment. There was no retrospective application — the law and its interpretation were consistent.

Key Differences: Paragraph 4(a) vs Paragraph 4(d)

• Deductible expenses: Under 4(a), both direct and indirect expenses are deductible. Under 4(d), only direct expenses directly related to earning that rental income are allowed.
• Capital allowances: Claimable under 4(a) on qualifying plant and machinery. Not available under 4(d).
• Rental losses: A 4(a) business loss can be set off against aggregate income from other sources and carried forward. A 4(d) rental loss is restricted — cannot be set off against other sources and cannot be carried forward.

What Property-Owning Companies Should Do Now

• Review your tenancy agreements — do they expressly require you to provide comprehensive maintenance, or only to respond to complaints?
• Review your actual maintenance practices and ensure records exist to show services are delivered proactively and comprehensively.
• Confirm whether your company is classified as an IHC, and whether Section 60F applies to your situation.
• Review your current and prior-year tax filing positions to assess exposure.

Need Help?

KS Chia & Associates advises companies on rental income classification, investment holding company tax treatment, and LHDN audit exposure. If you own properties through a company structure and are unsure whether your tax position is defensible, speak to us before your next filing.

WhatsApp or call us at 011-2366 5233.

Note: Glenmarie Estates retains the right to appeal to the Court of Appeal within 30 days from 22/04/2026. This article reflects the High Court decision. The position may change if the Court of Appeal rules differently.

Form BE Last-Minute Check: 5 Quiet Errors That Draw LHDN Attention (YA 2025)

Form BE e‑filing closes 30 April 2026. LHDN offers a grace period until 15 May 2026. Many salaried employees rush the submission and miss small details. The mistakes that cause issues are not obvious typos. They are quiet gaps that pass initial checks but raise flags later. We review hundreds of files each season. Here are the patterns we see.

Why “Quiet Errors” Matter More Than Typos

LHDN’s system validates your submission in real time. It accepts the form even if figures do not add up perfectly. The mismatch shows up later. You receive a CP500 instalment notice or an information request 3–6 months after filing. Correcting it then takes extra steps. You can file Amended BE Form to fix the record. Catching the error now saves time and removes uncertainty.

Silent Trigger #1: HK‑2 Working Sheet Figures Do Not Match the EA Form

Your employer submits the EA Form to LHDN. You submit the HK‑2 working sheet with your Form BE. LHDN’s system compares the two. A difference of even RM50 triggers a flag. Common causes: manual calculation slips, missing bonus lines, or using last year’s draft template. Solution: request the final EA Form from HR. Match each line to your HK‑2. Keep both documents for seven years.

Silent Trigger #2: Income Placed in the Wrong Section

Dividends, rental income, or side freelance work often land in the employment income section. This happens when taxpayers copy last year’s layout. For YA 2025, dividend income moves to Part BA (Item B8). Actively managed rental belongs on Form B, not Form BE. Passive rental can stay on Form BE. Misclassification changes your tax bracket and relief eligibility. Use the current MyTax portal layout. Do not copy-paste from prior years.

The Other 3 Triggers (Relief Claims & Documentation)

We track three more gaps. They sit in relief claims and supporting documents. They look routine on paper. LHDN checks them against your spending history and employer data.

We keep the exact verification steps, acceptable document formats, and response templates in our internal checklist. It saves clients hours when LHDN sends an information request.

Want the full 5‑point checklist and correction steps? WhatsApp “BE SAFE” to 011 2366 5233. We’ll send the PDF straight to your WhatsApp.

What If You Already Filed?

Do not wait for a notice. Log into MyTax. Compare your filed HK‑2 against your final EA Form. If figures differ, prepare Amended BE Form. LHDN allows penalty-free corrections for YA 2025 errors filed in 2026. If you need a quick review, send us your EA Form and HK‑2 draft via WhatsApp. We’ll check the alignment and flag gaps before they become queries.

Frequently Asked Questions

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Q: What is the Form BE filing deadline for YA 2025?

A: 30 April 2026. LHDN provides an e-filing grace period until 15 May 2026.

Q: What happens if my HK-2 does not match my EA Form?

A: LHDN’s automated system flags the difference.

Q: Can I still correct my Form BE after submission?

A: Yes. Submit Amended BE Form through MyTax. 

Q: Do I need to declare dividends on Form BE for YA 2025?

A: Yes. Report dividends in Part BA (Item B8). If your total dividend income exceeds RM100,000, the excess is subject to 2% tax.

Related Articles

Which form should I file — Form B or Form BE? (10 April 2026)

Danger Zone: Are you copying last year’s tax figures? (22 April 2026)

New 2% Dividend Tax for YA 2025

The Danger Zone: Why You Can't Ignore the New 2% Dividend Tax for YA 2025

For years, Malaysian taxpayers have enjoyed a straightforward rule: under the single-tier system, dividends received from Malaysian companies are tax-free. Because of this, many business owners and investors have developed a habit of simply copying last year's tax figures when filing their Form B. Starting in Year of Assessment (YA) 2025, that habit enters a dangerous new territory.

The Inland Revenue Board (LHDN) has introduced a new 2% Dividend Tax effective YA 2025. Because this is the first year taxpayers have to deal with it, it represents a massive "danger zone" for compliance. Failing to declare this income correctly can lead to severe penalties under Section 112(3) or Section 113(1) of the Income Tax Act 1967 for submitting incorrect returns.

What Changed with Dividend Tax in Malaysia?

To broaden the tax base, the government now imposes a 2% tax on dividend income distributed by a company to individual taxpayers that exceeds RM100,000 per annum. This applies whether the dividend is received in cash or in-specie.

The key facts you must know:

• The tax applies to dividends received from both listed and unlisted shares in Malaysia.
• It affects resident individuals, non-resident individuals, and individuals holding shares through nominees.
• Only the portion of dividend income exceeding the RM100,000 threshold is subject to the 2% tax.

How the Tax is Computed (It's Not Simple)

You cannot just lump your dividend income together with your business or employment income anymore. Under the new rules gazetted on 7 May 2025, dividend tax requires a separate computation.

The portion of your chargeable income attributable to dividends is determined using a specific statutory formula (A/B x C) under Part XXII of Schedule 1. This means your Form B now has a split structure to handle this dual tax computation:

• Part BA (Item B8): You must report your statutory dividend income here, separate from other income sources.
• Part BB (Item B26): The chargeable income subject to the dividend tax is calculated here using the formula.
• Part BB (Item B27): The 2% tax is applied to the calculated dividend amount.
• Part BB (Item B28): Your remaining chargeable income is taxed at normal scale rates.

Getting the mapping wrong between these sections will misstate your tax liability and could trigger an LHDN audit.

The Good News: Exemptions Apply

Not all dividends are caught in this new tax net. The following dividend sources remain exempt and are out-of-scope for the 2% tax:

• Profit distributions from the Employees Provident Fund (EPF / KWSP)
• Distributions from Amanah Saham Nasional Bumiputra (ASNB)
• Distributions from Lembaga Tabung Angkatan Tentera (LTAT) or any unit trusts
• Overseas (foreign source) dividend income
• Dividends from companies enjoying pioneer status or reinvestment allowances
• Dividends distributed by co-operatives

Who Needs to Be Careful?

The taxpayers most at risk of falling into this danger zone are:

Business owners and directors: Those who regularly extract profits from their private companies (Sdn Bhd) via dividends instead of salaries.

High-net-worth investors: Individuals holding significant portfolios of listed shares on Bursa Malaysia.

Joint assessment filers: Spouses filing together must now separately disclose the dividend-earning spouse's statutory dividend income.

Need Help Navigating YA 2025?

Do not assume your dividends are still tax-free. The first year of a new tax law is when the most costly mistakes happen. Let our team review your dividend income position and handle the complex new Form B computations for you.

Contact KS Chia & Associates (AF001828) for professional tax advisory and compliance services. WhatsApp us at 011 2366 5233.

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.