Malaysia: Estimate of tax payable for companies

In Malaysia, every company is required to determine and submit in a prescribed form (Form CP204) an estimate of its tax payable for a year of assessment (YA) to the Inland Revenue Board of Malaysia (IRB) within 3 months from the date of commencement of operation and thereafter not later than 30 days before the beginning of the basis period. 

With effect from YA 2014, SME first commences operation in a year of assessment and the SME has no basis period for that year of assessment and for the immediate following year of assessment, the SME is not required to furnished an estimate of tax payable in Form CP204 for that year of assessment and for the immediate 2 following years of assessments. 

SMEs are defined as companies with a paid-up capital in respect of ordinary shares of RM2.5million and below at the beginning of the basis period for the relevant years of assessment. In order to further assist our SMEs, the government allows them to be waived from paying the tax instalments at the beginning of both years of assessment. 

If a SME first comply with the requirement but subsequently exceeded the threshold, strictly the tax payer is required to furnish an estimate, one month before the beginning of the basis period. 

However, since the time to furnish the estimate has lapsed, the taxpayer is required to furnish an estimate of tax payable for that basis period to the IRB to enable the IRB to issue a direction. If there is no direction issued by the IRB, the case will be treated as a case of “no estimate furnish” and will subject to the penalty of 10% of the tax payable for that basis period. In addition, the failure to furnish an estimate, is an offence under income tax act. 

The company is required to maintain its paid up capital of RM2.5million or less at the commencement of its business and at the beginning of the 2 following years of assessment.