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

Dormant Company in Malaysia? Why You May Still Owe LHDN — and What to Do About It

This situation arises more often than directors expect: a company dormant since 2019, no Form C ever filed, a CP270 penalty notice for more than RM10,000. By the time the notice arrives, the remediation chain is already long — and the cost of resolving it is significantly higher than it would have been if the company had been closed properly from the start.

The Misconception That Causes This

Most directors with dormant companies operate on the same assumption: no activity means no obligation. That assumption is incorrect — and LHDN's enforcement position under Section 90(3) of the Income Tax Act 1967 makes the consequence of that assumption expensive.

LHDN does not automatically know your company is dormant. In the absence of a Form C submission, silence is treated as non-compliance, not inactivity. The same applies to EPF and SOCSO — neither authority automatically deregisters a company because it has ceased operations.

What Is a CP270 and How Is It Triggered?

A CP270 is a penalty notice issued by LHDN. When a company fails to submit Form C, LHDN is empowered under Section 90(3) of the Income Tax Act 1967 to raise a best-estimate assessment of the company's income. The estimate is LHDN's determination — not the company's declaration. Once issued, the burden shifts entirely to the company to dispute it. The CP270 is the penalty notice that follows that assessment.

What Dormant Companies Are Still Required to Submit

LHDN's official website states explicitly:

"Companies, limited liability partnerships, trust bodies and cooperative societies which are dormant and/or have not commenced business are required to furnish the ITRF (including Form E) with effect from Year of Assessment 2014."
Source: hasil.gov.my/en/company/

Two separate filing obligations apply to every dormant company in Malaysia:

• Form C (company income tax return) — required every year since the company was incorporated. The YA 2014 starting point does not apply to Form C. A company incorporated in 2010 that has been dormant since inception is required to have filed Form C for every year from its first year of assessment.
• Form E (employer's return) — required for dormant companies from YA 2014 onwards, per LHDN's official website. This obligation applies regardless of whether any business was conducted or any employees were on payroll.

Both obligations continue for as long as the company remains registered with SSM. Deregistration with SSM does not happen automatically — it requires a formal strike-off application, which itself can only be made after all filing and payment obligations are resolved.

The Remediation Chain — Once a CP270 Has Been Issued

A CP270 is not the end of the problem. It is the beginning of a remediation process that involves multiple authorities, each with their own requirements and timelines:

1. Respond to the CP270 — dispute or settle within the stipulated deadline. Ignoring it increases the liability and reduces the options available.
2. Prepare accounts and file outstanding Form C for all unfiled years since incorporation, with supporting financial statements.
3. File outstanding Form E for all years from YA 2014 to the current year in which the company remains registered.
4. Clear all outstanding tax liabilities and formally close the LHDN income tax file.
5. Close the EPF file — formal deregistration is required even if no contributions were ever made.
6. Close the SOCSO file — same requirement applies. Silence is not deregistration.
7. Apply for SSM strike-off — only after steps 1 to 6 are fully completed. SSM will not approve a strike-off where outstanding statutory obligations remain unresolved.

The Correct Sequence — Before a CP270 Arrives

If your company is dormant and you have not yet received a penalty notice, the window to resolve this cleanly is still open. Acting now means the company controls the timeline and the cost. Acting after a CP270 means responding to LHDN's timeline and LHDN's estimate. The correct sequence is:

1. Prepare final financial accounts for all outstanding years
2. File all outstanding Form C returns for every unfiled year since incorporation
3. File all outstanding Form E returns from YA 2014 onwards
4. Settle any tax liability and obtain formal closure of the LHDN tax file
5. Close EPF and SOCSO files
6. Apply for SSM strike-off — last step only

Key Facts Summary

Item	Position
Form C obligation — dormant company	Required every year since incorporation
Form E obligation — dormant company	Required every year from YA 2014 onwards
LHDN power when Form C not filed	Section 90(3) ITA 1967 — best-estimate assessment
Penalty notice type	CP270
SSM strike-off — when to apply	Only after LHDN, EPF and SOCSO files are closed

Sources

• Section 90(3), Income Tax Act 1967
• LHDN official website — Company taxpayer responsibilities: hasil.gov.my/en/company/
• ITRF Filing Programme: hasil.gov.my

Need Help?

KS Chia & Associates handles the full remediation process for dormant companies — accounts preparation, Form C filing for all outstanding years since incorporation, Form E filing from YA 2014 onwards, LHDN tax file closure, EPF and SOCSO deregistration, and SSM strike-off coordination.

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

5 Red Flags LHDNM Will See From Your e-Invoice Data

 LHDN is no longer just asking whether your business issues e-Invoices. They are checking how you issue them, and whether your numbers tell a consistent story. Since e-Invoice implementation began on 1 August 2024, HASiL has actively used transaction data to cross-match against tax returns.

Recent press statements confirm that more than 500,000 potential cases have been flagged where financial activity does not match existing tax records. This data-matching exercise has already resulted in 38,906 taxpayers voluntarily declaring RM3.5 billion in previously unreported income.

Here are the 5 red flags in your e-Invoice data that can trigger an LHDN review.

1. Your e-Invoice Revenue Does Not Match Your Tax Return

If your MyInvois portal shows validated e-Invoices totalling RM10 million, but your Form C or Form B declares RM6 million in income, that gap is visible the moment HASiL runs a data match. No audit officer needs to visit your premises to identify this discrepancy.

HASiL confirmed in its February 2026 press statement that more than 500,000 potential cases were flagged for exactly this pattern — high financial activity with no corresponding tax record.

KS Chia's take: The reconciliation between your MyInvois submission log and your audited accounts is now a compliance document. If those two numbers cannot be explained and reconciled, you are exposed before anyone asks a single question.

2. Frequent Cancellations and Credit Notes

The occasional credit note is normal business practice. But a pattern of frequent cancellations or credit notes — particularly with related companies, major customers, or at year-end — signals potential revenue reversal activity.

Under the e-Invoice framework, credit notes, debit notes, and refund notes are all submitted to and validated through the MyInvois portal. The full transaction trail is visible to HASiL. Adjustments do not disappear — they create a data record of their own.

KS Chia's take: Every credit note should have a clear, documented business reason that your finance team can explain immediately. If the justification is not on file, the pattern will be the story.

3. Invoice Splitting to Avoid the RM10,000 Threshold

For Phase 1, 2, and 3 businesses: the RM10,000 threshold is fully operative now. Every single transaction above RM10,000 requires its own individual validated e-Invoice. Artificially splitting one RM15,000 transaction into two RM7,500 invoices to route it through the consolidated channel is precisely the type of invoicing anomaly that data-matching analytics is designed to surface.

For Phase 4 businesses: the RM10,000 rule is suspended during the relaxation period. Under e-Invoice Specific Guideline Version 4.7, Section 16.2(a) overrides the standing obligation in Section 3.7 — Phase 4 taxpayers may issue consolidated e-Invoices for all transactions, including those above RM10,000, until 31 December 2027.

KS Chia's take: The relaxation is real and significant — but it expires 1 January 2028. Phase 4 businesses should use this window to build the right workflows now. For any Phase 1-3 client, invoice splitting above RM10,000 is a workflow risk that needs to be corrected today.

4. Self-Billed e-Invoices Your Supplier Did Not Reflect

If your customer issues a self-billed e-Invoice to you — for commission payments, freight rebates, sub-contractor fees — that transaction is validated in the MyInvois portal and visible to HASiL. If your books do not reflect the same amount, or you never declared that income at all, the mismatch is automatic.

KS Chia's take: This catches many SME clients off guard — particularly agents, sub-contractors, and logistics operators who assume "if I did not issue the invoice, there is nothing to declare." Under self-billing, your customer creates the record. Your obligation to declare the income exists regardless of who generated the document.

5. Operational Records That Do Not Align With Your e-Invoice Trail

At the system level, HASiL cross-references validated e-Invoice data against filed tax returns to identify income discrepancies. In a field audit, LHDN officers go further — comparing physical delivery orders, goods received notes, stock movement records, and e-Invoice logs.

If your delivery order shows 500 units dispatched but your e-Invoice records show only 400 units billed, that discrepancy will be queried and documented.

KS Chia's take: e-Invoice data does not replace field audits — it makes the starting point for a field audit far easier to identify and justify. For trading, manufacturing, and logistics businesses, your warehouse, operations, and sales teams now generate data that feeds directly into your tax risk profile. This is not just a finance department issue.

What You Should Do Now

• Reconcile your MyInvois submission log against your YA 2024 and YA 2025 declared income — now, before filing season closes.

• Review your credit note and cancellation log for patterns that cannot be immediately explained.

• If you are Phase 1, 2, or 3 — check your invoicing workflow for any transactions above RM10,000 being processed through the consolidated route.

• If you received a nudge letter — act before it becomes a formal audit notice. Voluntary disclosure at this stage carries materially lower penalty exposure.

• If you are Phase 4 — use the relaxation period to build compliant workflows. 1 January 2028 is a hard deadline.

Need Help?

Contact KS Chia & Associates (AF001828) for professional advice on e-Invoice compliance and tax risk management.

WhatsApp us at 011 2366 5233.

Sources:

•HASiL press statement HASiL/2026/02/03–10, dated 03/02/2026

•HASiL press statement HASiL/2026/04/27–25, dated 27/04/2026

•e-Invoice Specific Guideline V4.7, Sections 3.7, 16.2(a), and 16.2(d)

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.

Form C YA 2026: Key Changes

Form C YA 2026: Key Changes and Updates Explained

LHDNM just released the new Form C for YA 2026. If you run a company in Malaysia, you need to understand how these reporting changes affect your annual tax filing. Our team compared the YA 2025 and YA 2026 forms to highlight the most important updates.

 

New Disclosures for Labuan and Venture Capital Entities

The YA 2026 form introduces three new disclosure items in the basic particulars section. Companies must now declare if they are a Labuan company (Item 19), a Venture Capital Company (Item 20), or a Venture Capital Management Company (Item 21). These items did not exist in the YA 2025 form.

LHDNM also added specific lines in the chargeable income section — A21 for Venture Capital Fund Entity income and A22 for Venture Capital Management income. The tax payable section now includes dedicated rate lines: 5% for VC Fund Entities and 10% for VC Management Companies.

Beneficial Owner Section Removed

One major change is the complete removal of the "Beneficial Owner" section from Part G. This removal addresses significant practical challenges raised by industry bodies like CTIM. Previously, tax practitioners struggled to acquire BO information because company secretaries were often restricted from releasing this confidential data without explicit director consent. There was also a timing mismatch between CCM anniversary filings and tax financial year-ends. LHDNM has acknowledged these challenges, and this duplicative reporting requirement is now gone in YA 2026.

Expanded Top-up Tax Reporting

For multinational companies, the reporting for Domestic Top-up Tax (DTT) and Multinational Top-up Tax (MTT) has been expanded. Instead of a simple Yes/No, companies must now specify if they are subject to DTT only, MTT only, both, or neither. The Ultimate Parent Entity's name and jurisdiction are now captured in separate fields.

Declaration Wording Updated

The declaration section now includes "to the best of this company's knowledge" — a new qualifier that was not present in YA 2025. Directors signing the declaration should take note of this change.

Direct Communication with Taxpayers

A very notable addition is the new standalone fields for the company's telephone number (G3) and email address (G4) in Part G. This indicates that LHDNM intends to communicate directly with the taxpayer company, rather than relying solely on correspondence through the appointed tax agent. Companies should ensure the contact details provided here are actively monitored.

Other Changes

The transfer pricing section replaces generic "Others" options with more specific descriptions like "Manufacturer other than the above." The CbCR reporting entity attachment now includes a TIN field for the ultimate holding entity.

Need Help?

Contact KS Chia & Associates (AF001828) for professional advice on your corporate tax filing under the new Form C YA 2026 requirements. 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.