The story begins in a parliamentary chamber on a Tuesday in February. Lim Guan Eng, the MP for Bagan, had asked a straightforward question: how many CP500 notices had gone out, for how much money, and could they be withdrawn when they landed in the wrong letterboxes?
The written reply, dated 24 February 2026, laid it out. The Finance Ministry told Dewan Rakyat that the Inland Revenue Board had issued nearly 200,000 instalment payment notices. The total bill: RM1.11 billion.
CP500 is meant for people with non-employment income — rental, business, royalties. But the ministry acknowledged a glitch. A number of taxpayers who only earn a salary had received the notices anyway. Their employment income had been mistakenly declared as non-employment income on their tax returns.
For those involved, the notice was a shock. Landlords and freelancers who had never expected a demand found themselves staring at instalment schedules they had not planned for.
LHDN is cancelling the erroneous notices. The fix, however, lands on the taxpayer. Affected individuals must submit a CP502 amendment form together with their EA or EC form to a dedicated help desk at [email protected].
No penalties will be imposed for non-payment of CP500 instalments this year. Prime Minister Datuk Seri Anwar Ibrahim had announced the penalty-free period on 5 January, a transition window for the 2026 year of assessment.
The IRB echoed that relief the same day. Taxpayers with both salaried and non-salaried income get more time to comply without penalty. Voluntary payments are still encouraged to reduce the final tax bill.
Two revision deadlines loom. The first CP502 revision is due by 30 June 2026. The second, by 31 October 2026.
Taxpayers who only have employment income are not required to comply with CP500 at all. They are advised to ensure accurate reporting in their 2025 return to avoid future notices.
The ministry said the move aims to support taxpayers while ensuring fair collection. The IRB added it will contact affected taxpayers to clarify reporting errors in previously submitted returns.
Sources
- 200,000 CP500 notices involving RM1.11bil issued by LHDN, Dewan Rakyat told | The Star
- IRB: No CP500 penalty in 2026 for taxpayers with rental or freelance income
