What is Tax Estimation
Based on estimated company profit, a company that has just begun their operation shall estimate their tax payable or tax payment for the first year of assessment. This estimated tax payable will be the benchmark for the next year of assessment of the company and business income.
Estimated taxes can be calculated for any taxable income that isn’t subject to withholding. Earned income, dividend income, rental income, interest income, and capital gains are all included. Anyone with income that is not subject to automatic withholding must make quarterly estimated tax payments with the Federal Revenue Service (IRS). The tax payers next submits the standard tax paperwork for the entire year, paying the balance owed or requesting compensation for an overpayment.
What is CP204 Form
CP204 Form is a prescribed form of a company’s tax payable for a year of assessment and companies are required to estimate and submit this form to Inland Revenue Board (IRB) or Lembaga Hasil Dalam Negeri (LHDN) Malaysia. It is a statement of estimated tax payable for the current YA, and includes information such as the company’s estimated chargeable income, tax adjustments, and tax relief.
It is important to note that a new company must submit CP204 Form within 3 months after their business is incorporated. However, for existing companies are required to submit estimation of tax payable form or CP204 Form payment by 30 days before the beginning of the basis period of assessment.
Additional information
- It is not a requirement for SME to submit the estimate of tax payable or make instalment payments within the first 2 years of assessment.
- However, to notify the LHDN of the SME status, SME are advised to submit their estimated tax payable within the datelines even though the estimated tax amounting to zero, to avoid unnecessary penalty.
- If a SME received a penalty under Section 107C or a notification of legal proceedings under Section 120 is issued, the company can refer to the nearest LHDN branch where the company income tax returns are maintained to waive the penalty. However, the waiver is subject to approval.
- What is CP500 ? A “Prepayment of Income Tax by Instalment” or “Notis Bayaran Ansuran” is referred to as CP500. The IRM/LHDN created the CP500 tax instalment payment scheme to allow taxpayers to declare alternative types of income, such as rental income, royalties, or other company profits.
- The monthly instalment of estimated tax should be paid not later than the 15th of each month.
How to estimate CP204
To estimate CP204 in Malaysia, you will need to gather information about your taxable income, bill number, capital allowances, and deductions for the current year. Beginning in 2019, trust bodies, cooperatives, and limited liability partnerships (LLP) must submit the CP204 form via e-filing.
Based on this information, you can calculate your estimated number tax liability using the tax rate schedule provided by the Inland Revenue Board. For tax estimation, you can also use online tax calculators (Free Tax Calculator) or consult a tax professional for assistance in estimating your CP204 payment in Malaysia.
How to submit CP204 online – You may login as a director of your company via your e-form login (https://ez.hasil.gov.my/PKI/e/userloginAnggaran.html) or ask your tax agent to submit for you.
When to submit your CP204 Form
New company
Your company was incorporated on 25/02/2021. The start date of operation is on 1/04/2021 and the first financial accounts were prepared up to the date of 31/12/2022.
Hence, you need to submit CP204 form not later than 30/06/2021 (3 months from the start date of operation).
Existing company
The basis period of your company is from 1/07/2021 to 30/06/2022 for the year of assessment 2022.
Hence, you need to submit CP204 form (borang CP204) not later than 31/05/2021 (30 days before the beginning of the basis period) to refrain from CP204 late submission penalty.
Submission of CP204 Form within the stipulated time
- If you wish to revise the estimate of tax payable, you need to use a prescribed form of CP204A on the 6th and the 9th of the basis period.
- However, if you plan to revise your company tax other than 6th and 9th month of the basis period, you must submit an appeal letter to LHDN (subject to approval).
- Important to note that the estimate of tax payable of the current year cannot be less than 85% of the revised estimate tax payable for the following year of assessment
- If there is no revised estimate tax submitted, the current year tax estimate should be more or at least 85% of the estimated tax payable for the preceding year of assessment.
- If the difference between the actual tax payable and the estimated tax payable is more than 30%, a 10% penalty will be imposed on that difference.
