No Penalty on CP500 Instalment Notices for 2026: What Individual Taxpayers Need to Know

In a welcome move for Malaysian individual taxpayers, the Inland Revenue Board of Malaysia (HASiL) has announced that no penalty will be imposed on taxpayers who receive a CP500 Instalment Payment Notice and choose not to make payments during the 2026 tax year. This concession, which follows the Prime Minister’s New Year 2026 Message, provides meaningful relief to individuals navigating mixed sources of income.

Background: What is CP500?

CP500 is an instalment payment notice issued by HASiL to individual taxpayers who earn income beyond employment, such as rental income, interest, or royalties. It requires taxpayers to make bi-monthly advance tax payments throughout the year, helping to spread the tax liability rather than settling it all at once upon filing the Income Tax Return Form (BNCP).

For individuals with both employment income and non-employment income — a common scenario for salaried professionals who also earn rental or investment returns — receiving a CP500 notice is routine. However, compliance with it has historically attracted penalties for non-payment.

The 2026 Concession: Key Highlights

HASiL has confirmed that for Assessment Year (AY) 2026, the following concessions apply:

• No penalty will be imposed on individual taxpayers who receive a CP500 notice but do not make the instalment payments during 2026.

• This applies to individuals with income from both employment AND non-employment sources (e.g. rent, interest, royalties).

• Taxpayers with only employment income are not required to comply with CP500 instalment instructions.

• Voluntary payments are still encouraged to ease the final tax settlement burden at the time of BNCP filing.

Why Does This Matter?

The concession reflects the government’s recognition that many individual taxpayers with mixed income sources have faced confusion or financial difficulty in meeting CP500 obligations. By offering a penalty-free transition period for YA2026, HASiL is providing breathing room for taxpayers to better understand their obligations and align their reporting accordingly.

This is not, however, a waiver of the underlying tax liability. Taxpayers are reminded that any unpaid instalment amounts will still need to be settled when filing their BNCP. Skipping CP500 payments merely defers the payment — it does not reduce the total tax owed.

Action Steps for Taxpayers

While benefiting from this concession, taxpayers should take proactive steps:

• Update income reporting in BNCP for YA2025: HASiL advises taxpayers to ensure their income declarations in past BNCP filings are accurate to avoid receiving CP500 notices unnecessarily in future years.

• Consider voluntary CP500 payments: Even though penalties are waived, making voluntary payments helps reduce a potentially large lump-sum tax bill when filing returns.

• Apply for CP502 amendment if needed: Taxpayers who wish to revise their CP500 instalment amount may submit a CP502 (Application for Amendment of Instalment Payment) — first amendment by 30 June 2026 and second amendment by 31 October 2026.

• Watch for HASiL outreach: HASiL has indicated it will proactively contact affected taxpayers to clarify any income reporting discrepancies identified in previously submitted BNCPs.

How to Access the CP502 Form

The CP502 form and its explanatory notes can be downloaded from HASiL’s official portal:

• Visit www.hasil.gov.my

• Navigate to: Menu Forms > Download Forms > Other Forms > CP502 / CP502 Explanatory Notes

Looking Ahead

This concession is specifically for YA2026 and is framed as a transition measure. Taxpayers should not assume this relief will extend beyond 2026. Instead, the grace period should be used wisely — to ensure income is accurately reported, obligations are well understood, and financial planning accounts for the eventual tax settlement upon BNCP filing.

HASiL has reaffirmed its commitment to supporting taxpayers through education and outreach, with the goal of making tax compliance more transparent and manageable for all Malaysians.

Source: HASiL Media Statement HASiL/2026/01/05–02, Jabatan Khidmat Korporat, Lembaga Hasil Dalam Negeri Malaysia, issued 5 January 2026. Available at: www.hasil.gov.my