CP204 Estimated Tax Malaysia — How to Avoid Penalties (2025 Guide)

What Is CP204 and Why Every Sdn Bhd Must File It

If you run a Sdn Bhd in Malaysia, CP204 is not optional. It is the statutory mechanism under Section 107C of the Income Tax Act 1967 that requires every resident company to pre-pay its tax in monthly installments — rather than settling the full amount at year-end when Form C is filed.

Think of it as LHDN's cash flow tool. Instead of waiting until April 30 (or 7 months after your financial year end) to collect your company's entire tax bill, LHDN collects it in 12 bites throughout the year. For your Sdn Bhd, the obligation starts the moment your assessment year begins — not when your tax agent files Form C.

Every Sdn Bhd in Malaysia — from a two-person startup in Petaling Jaya to a 200-staff manufacturing firm in Johor Bahru — follows this system. Understanding it properly protects you from penalties, improves your cash flow planning, and removes the nasty surprise of a large balance tax at year-end.

Who Must File — and Who Gets a 2-Year Exemption

All resident companies — Sdn Bhd and Bhd alike — must file CP204. There is one meaningful exemption: newly incorporated companies are exempt from CP204 for their first two Years of Assessment after commencement of business operations.

This means if your Sdn Bhd incorporated and started business in 2024, you don't need CP204 for YA 2024 and YA 2025. From YA 2026 onward, it is mandatory.

"Commencement of business" is not necessarily the SSM incorporation date — it's when your company starts earning income. LHDN looks at when actual operations began. If your Sdn Bhd sat dormant for a year before trading, that year doesn't count toward the 2-year exemption window.

For established companies: there is no exemption based on size, turnover, or profitability. Even if your company made a loss last year, CP204 installments are still required — based on your estimate of this assessment year's likely tax. A zero estimate is possible if you genuinely expect zero chargeable income, but you must still submit the CP204 form.

How CP204 Is Calculated: Two Methods

LHDN allows two approaches for estimating your CP204 amount:

Method 1: Prior Year Basis (most common)
Take your actual tax payable from your last filed Form C and divide by 12. This is the default approach. It's simple, defensible, and avoids questions from LHDN — as long as your current-year profit doesn't swing dramatically from last year. Your monthly installment = prior year tax ÷ 12.

Method 2: Current Year Estimate
If your business has changed significantly — major new contract, a downturn, restructuring, or this is your first assessable year — you can self-estimate based on projected current-year profit. Keep written documentation of your projections. LHDN may query a downward revision if it looks suspiciously low without justification.

Critical rule: your CP204 estimate should not be less than 85% of the prior year's actual tax payable without good reason. If you go lower and your actual tax turns out to be higher, the 10% penalty under Section 107C(9) applies to the shortfall above the 30% tolerance threshold.

For a full picture of how your company's chargeable income and tax payable is calculated before you set your CP204 estimate, read our corporate tax Malaysia guide.

CP204 vs CP500: What's the Difference?

Feature	CP204 (Companies)	CP500 (Individuals / Sole Proprietors)
Who it applies to	Resident companies (Sdn Bhd, Bhd)	Individuals, sole proprietors, partnerships
Number of installments	12 monthly installments	6 bi-monthly installments
Payment due date	15th of each month	15th of the bi-monthly due month
Assessment year start	Month 2 of financial year	March of the calendar year
Revision mechanism	CP204A (Month 6 or Month 9)	CP500A (any time)
Penalty for shortfall > 30%	10% under Section 107C(9) ITA 1967	10% under Section 107C(10) ITA 1967
Submission portal	MyTax (mytax.hasil.gov.my)	MyTax (mytax.hasil.gov.my)

Same concept, different form. If you own a Sdn Bhd, CP204 is yours. If you run a sole proprietorship or partnership, CP500 is yours. Never file the wrong form — LHDN tracks by entity type and a mismatch creates a compliance gap in your records.

CP204 Payment Schedule: 12 Installments, 15th of Each Month

CP204 installments run from Month 2 to Month 13 of your assessment year — effectively from the second month of your financial year through to the first month of the following year. Each is due by the 15th of that calendar month.

Installment	Assessment Month	Calendar Month (FYE Dec 31 example)	Due Date
1st	Month 2	February	15 Feb
2nd	Month 3	March	15 Mar
3rd	Month 4	April	15 Apr
4th	Month 5	May	15 May
5th	Month 6	June	15 Jun
6th	Month 7	July	15 Jul
7th	Month 8	August	15 Aug
8th	Month 9	September	15 Sep
9th	Month 10	October	15 Oct
10th	Month 11	November	15 Nov
11th	Month 12	December	15 Dec
12th	Month 13	January (next year)	15 Jan

Month 1 has no installment — that's when you submit the CP204 estimate, before payments begin. If your FYE is not December 31, shift the calendar months accordingly. A company with FYE March 31 starts its first installment in May and ends in April of the following year.

Missing the 15th by even one day? LHDN does not grant automatic grace periods for CP204. The installment is considered late and a 10% surcharge applies to that month's payment under Section 107C(3). Set a calendar reminder two days early.

How to Submit Your CP204 Estimate via MyTax

1. Log in to MyTax at mytax.hasil.gov.my using your company's Tax Identification Number and password.
2. Navigate to Services → e-Filing → e-CP204. Select the correct Year of Assessment.
3. Enter your estimated tax payable for the full assessment year. MyTax auto-divides by 12 to generate monthly installment amounts.
4. Review the schedule. Confirm Month 2 through Month 13 dates and amounts are correct before submitting.
5. Submit and pay each installment via FPX bank transfer through MyTax by the 15th of each month. Save the submission receipt for your Form C audit trail.

The CP204 estimate submission itself must be done before Month 2's installment is due. For a December FYE company, that means submitting before 15 February. Late submission of the CP204 form (not just the payments) also attracts a penalty under Section 120 ITA 1967.

Need help reviewing your estimate before you lock it in? WhatsApp our team — we'll check it against your last Form C and flag any shortfall risk before Month 2 arrives.

Revising Your Estimate: CP204A in Month 6 or Month 9

Things change mid-year. A major client pays late. A new product line takes off. You close a branch. LHDN gives you two windows to revise your CP204 estimate without triggering penalties:

• Month 6 revision: Submit e-CP204A via MyTax during the 6th month of your assessment year. The revised estimate applies to the remaining 7 installments (Month 7 through Month 13).
• Month 9 revision: Submit e-CP204A during the 9th month. Remaining installments (Month 10 through Month 13) are adjusted.

You can revise upward or downward. Revising downward saves cash now but is risky — if your actual tax turns out to be higher than your revised estimate, the 10% penalty applies to the gap. If you're uncertain, err slightly higher. Overpaying becomes a refund after Form C; underpaying becomes a penalty.

Miss both revision windows? You're locked in at your original estimate until Form C reconciliation. If your actual tax is significantly higher, the 10% Section 107C(9) shortfall penalty applies automatically.

Penalties for Non-Payment or Underestimation

The penalties are statutory and non-negotiable. Here's a clear breakdown:

Scenario	Penalty	Legal Basis
Actual tax exceeds installments by > 30%	10% on the shortfall amount	Section 107C(9) ITA 1967
Individual monthly installment missed or late	10% surcharge on the missed installment	Section 107C(3) ITA 1967
CP204 estimate form not submitted on time	Compound penalty (minimum RM200)	Section 120 ITA 1967
Deliberate underestimation or non-disclosure	Compound penalty up to 3x tax evaded	Section 113 ITA 1967

Practical example: if your actual tax for YA 2025 is RM100,000 and you only paid RM60,000 in CP204 installments, your shortfall is RM40,000 — 40% of actual tax. Since it exceeds the 30% threshold, LHDN charges 10% × RM40,000 = RM4,000 penalty on top of the RM40,000 balance. That RM4,000 is not a service fee or estimate — it's a legal penalty under Section 107C(9) ITA 1967, billed with your Form C assessment.

The 30% buffer exists to protect companies where estimates were reasonably made but diverged due to genuine business changes. It is not a license to deliberately underpay.

After Your Financial Year End: Reconciling CP204 with Form C

When your financial year ends and your tax agent prepares Form C, LHDN reconciles your total CP204 installments against your actual tax payable for the year. Two outcomes are possible:

You overpaid (installments > actual tax): The excess becomes a tax credit. You can offset it against next year's CP204 installments or request a cash refund via MyTax. Refunds typically take 30–90 days. This is a good problem to have — no penalty, just a waiting period.

You underpaid (installments < actual tax): The balance ("cukai baki") is due with Form C — by 7 months after your FYE, or April 30 for December FYE companies. If the shortfall exceeds 30% of actual tax, the Section 107C(9) penalty triggers automatically. Pay your balance on time to avoid a second layer of penalties.

CP204 is designed to mean that by the time Form C is filed, most of your tax is already settled. Think of it as a tax savings plan — 12 monthly payments that smooth out cash flow instead of one large lump sum each April.

For the full Form C filing process and how the final tax computation connects back to your CP204 installments, read our company tax return Malaysia guide.

Frequently Asked Questions