CP500: Installment to Pay Tax in Malaysia

CP500 is a tax installment scheme for individuals with non-salary income, such as business profits, rental income, or royalties.

Unlike employees who have their taxes deducted monthly through PCB, these individuals must pay their taxes in advance through CP500.

LHDN (Inland Revenue Board of Malaysia) introduced CP500 to help taxpayers manage their payments.

Instead of paying a large amount at the end of the year, they can spread the payments into six installments.

As a business owner or freelancer, understanding CP500 is important. It helps avoid penalties and ensures smooth tax management.

This guide covers who needs to pay CP500, how it works, and how to stay compliant.

What is CP500?

CP500, also known as Notis Bayaran Ansuran, is an installment tax payment scheme for individuals who earn income outside of employment.

Unlike PCB, which applies to salaried employees, CP500 is meant for business owners, freelancers, landlords, rental, royalties and individuals receiving royalties.

Since these types of income do not have automatic tax deductions, LHDN estimates the tax amount and divides it into six bi-monthly payments.

Payments start in March each year. If needed, employers can apply for a first amendment before June 30 or October 31.

The second amendment must be submitted by October 31.

Who is Required to Pay CP500?

Not everyone needs to pay CP500. It only applies to individuals with non-salary income such as:

Business owners operating as sole proprietors or partnerships.
Freelancers or self-employed individuals.
Landlords who earn rental income.
Individuals receiving royalties or other non-fixed income.

Employees with a fixed salary do not need to pay CP500. Their tax is already deducted through PCB (Monthly Tax Deduction).

However, if a business owner or freelancer does not receive a CP500 notice but earns taxable income, they should contact LHDN to check their tax status.

Who Will Receive Form CP500?

Each year in February, LHDN automatically issues Form CP500 to taxpayers who earned non-salary income in the previous year. This form states:

The estimated tax amount for the current year.
The installment due dates.
The total number of payments (six bi-monthly installments).

If a taxpayer earned business or rental income last year, they will likely receive CP500 in the current year.

However, there are exceptions:

If a taxpayer has no taxable non-salary income, they will not receive CP500.
If CP500 is sent to the wrong address, the taxpayer must contact LHDN to request a copy.
If a business has shut down or no longer generates taxable income, the taxpayer can apply for a CP500 revision.

When Will I Receive CP500?

Form CP500 is usually sent out in February each year by LHDN. Taxpayers should check their mail or MyTax account around this time.

If they do not receive it by the end of February, they should contact LHDN or visit the nearest branch.

What is the Due Date for CP500?

The CP500 installment payments are due every two months according to the schedule set by LHDN. The payment dates are:

30 March
30 May
30 July
30 September
30 November
30 January (of the following year)

Each payment must be made within 30 days of the due date. Failure to pay on time results in a 10% penalty on the outstanding balance.

Can I Revise CP500 Installment?

Yes, taxpayers can apply for a revision if they believe the CP500 estimate is too high or if their business income has changed.

To revise CP500, taxpayers must:

Submit Form CP502 to LHDN before 30 June of the current assessment year.
Provide evidence of lower income, such as business records or financial statements.
Wait for LHDN to review and confirm the new CP500 installment amount.

However, if the revised amount is more than 30% lower than the actual tax payable, LHDN may impose a 10% penalty for underpayment.

If a business has closed down or is no longer profitable, taxpayers should submit Form CP502 as early as possible to stop CP500 deductions.

What if I Do Not Receive CP500?

If a taxpayer does not receive CP500 by the end of February, they should:

Visit the nearest LHDN branch to check their status.
Call the Hasil Care Line at 1-800-88-5436 for assistance.
Log into MyTax to check if the CP500 notice is available online.

Not receiving CP500 does not mean a taxpayer is exempt from paying tax. If business income is earned, tax may still be due at the end of the year.

How to Calculate CP500 Tax Installments

The CP500 amount is calculated based on your previous year's tax assessment, with LHDN estimating your tax liability and splitting it into six bi-monthly installment payments.

1. Estimate Your Annual Taxable Income

Include all non-salary earnings:

Business profits
Rental income
Freelance/commission earnings
Other taxable income

2. Determine Taxable Amount After Deductions

Deduct allowable expenses and reliefs such as:

EPF (Employee Provident Fund) contributions
SOCSO/Perkeso
Insurance premiums
Education, medical, and lifestyle reliefs

3. Apply the Progressive Tax Rates

Malaysia uses a progressive tax rate system ranging from 0% to 30% depending on income brackets.

Example (for YA 2024):

RM0 – RM5,000: 0%
RM5,001 – RM20,000: 1%
RM20,001 – RM35,000: 3%
RM35,001 – RM50,000: 8%
RM50,001 – RM70,000: 13%
RM70,001 – RM100,000: 21%
RM100,001 – RM250,000: 24%
RM250,001 – RM400,000: 25%
RM400,001 – RM600,000: 26%
RM600,001 – RM2,000,000: 28%
RM2,000,001 and above: 30%

4. Compute the Estimated Tax Payable

Use the tax brackets above to calculate the total tax due.

Example: If your taxable income is RM80,000:

First RM35,000 = RM400 tax
Next RM15,000 = RM1,200 tax
Next RM15,000 = RM1,950 tax
Next RM15,000 = RM3,150 tax
Total Tax Payable: RM6,700

5. Divide into CP500 Installments

LHDN typically divides your estimated tax into six payments across the year.

Using the RM6,700 example:

RM6,700 ÷ 6 = RM1,116.67 per installment

CP500 Payment Schedule

Payments are due in six installments: March, May, July, September, November, and January.

How LHDN Determines the CP500 Amount

LHDN calculates the estimated tax payable based on:

The taxpayer’s reported non-salary income from the previous year.
The applicable tax rate based on Malaysia’s tax structure.
The assumption that the taxpayer will earn a similar amount in the current year.

Because this amount is an estimate, business owners whose income changes significantly can request a revision of CP500 by submitting Form CP502 before 30 June.

How Employers Should Prepare for CP500 Payments

For sole proprietors and business owners, CP500 payments should be factored into financial planning.

Since these payments are based on past earnings, businesses should:

Check their CP500 notice as soon as it is issued in February to confirm the amount and due dates.
Plan cash flow accordingly to cover bi-monthly tax payments without disrupting business expenses.
Set aside funds each month to avoid missing payments and facing penalties.
If income is lower than the previous year, apply for a CP500 revision early to adjust the installment amount.

How to Pay CP500

CP500 can be paid through multiple methods:

Online via MyTax Portal (LHDN’s official website).
FPX (Online Banking) through selected Malaysian banks.
At bank counters or LHDN payment centers.
Cheque or cash deposits at POS Malaysia counters.

Before making a payment, taxpayers should retrieve their CP500 bill number from MyTax.

To check CP500 installment status, taxpayers can log into MyTax and review their outstanding payments.

Penalties for Late or Non-Payment of CP500

Late CP500 payments result in a 10% penalty on the outstanding balance.

If a taxpayer fails to pay CP500 entirely, they may face:

Additional fines or legal action by LHDN.
Higher tax amounts due at the end of the year.
Difficulties renewing business-related licenses or approvals.

If a taxpayer cannot pay on time, they may request an installment plan from LHDN, but late penalties still apply.

CP500 vs. CP204: What’s the Difference?

Some business owners confuse CP500 and CP204, but they apply to different types of taxpayers:

CP500	CP204
For sole proprietors, freelancers, landlords	For companies with chargeable income over RM20,000
Issued automatically by LHDN	Companies must submit CP204 voluntarily
Based on previous year’s non-salary income	Based on the current year’s estimated profit
Paid every two months (six installments)	Paid every month (twelve installments)

Employers who operate sole proprietorships will likely deal with CP500, while companies must handle CP204.

FAQ

Can I opt out of CP500 payments?

No, CP500 is automatically issued based on the previous year’s income. However, if your income is lower or your business has closed, you can request a revision using Form CP502 before 30 June.

What happens if my business income is lower than the estimated tax?

You can apply for a CP500 revision (Form CP502) before 30 June. If the revised amount is over 30% lower than the actual tax due, LHDN may impose a 10% penalty on the difference.

How can I request a CP500 refund?

If CP500 payments exceed the actual tax due, LHDN will process a refund automatically after you file your tax return. Ensure your bank details are updated in MyTax to receive the refund.

What are the consequences of not paying CP500 on time?

Late payments incur a 10% penalty on the outstanding amount. Ignoring CP500 may result in higher tax payments, additional fines, or legal enforcement by LHDN.

How do I check my CP500 balance or outstanding payments?

Log into MyTax (LHDN portal) to check your CP500 payment status, balance, and outstanding installments.

For business owners, freelancers, and landlords, CP500 (installment to pay tax) is an important part of tax management.

Instead of paying a large lump sum at the end of the year, taxpayers can spread their payments over six months.

To avoid penalties, it is important to pay CP500 on time, track tax obligations, and revise the installment amount if needed.

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