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FAQs – “11th month” revision and deferment of CP204 and CP500 payments

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EY Malaysia Tax
30 Nov 2021
Subject Tax alert
Categories Tax alert
Jurisdictions Malaysia

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FAQs on the revision of estimate of tax payable in the 11th month of the basis period and the deferment of CP204 and CP500 payments

In Budget 2022, it was announced that:

  • All businesses are allowed to revise their income tax estimates in the 11th month of the basis period, before 31 October 2022, and
  • Microenterprises and small and medium enterprises (MSMEs) are allowed to defer their monthly income tax instalment payments for six months, until 30 June 2022

Following the above, the Inland Revenue Board (IRB) has published on its website an FAQ document in Bahasa Malaysia, titled “Pindaan Anggaran Cukai Kena Dibayar (CP204) Pada Bulan Ke-11 Tempoh Asas Bagi Tahun Taksiran 2021 Dan 2022 Dan Penangguhan Bayaran CP204 Dan Skim Bayaran Ansuran (CP500) Bagi Perusahaan Mikro Kecil Dan Sederhana (PMKS) Mulai 1 Januari 2022 Hingga 30 Jun 2022 Di Bawah Bajet 2022”, dated 25 November 2021. For ease of reference, the full version of the FAQs, translated from the Bahasa Malaysia version, is set out in Appendix III and Appendix IV to this alert.

Some key points to note below:

  • Based on Q8 of Appendix III, it appears that for the purpose of assessing the underestimation penalty under Section 107C(10) of the ITA, the 11th month revision is not taken into consideration. The FAQs states that if the company’s final tax liability per the tax return exceeds the revised estimate of tax payable in the sixth or ninth month of the basis period by more than 30% of the final tax, the amount in excess of 30% will be subject to a 10% penalty. It is hoped that this is an error in the FAQs and this point is being clarified with the IRB.  If the IRB does indeed use the 6th or 9th month estimate to calculate the underestimation penalties, there may be no benefit for taxpayers to make an upward revision in the 11th month.
  • Based on Q10 of Appendix III, it is noted that:
    -     Companies with a financial year ending on 31 December 2021 are given some leeway to apply for the 11th month revision until 10 December 2021
    -     Where a company’s 11th month of the basis period falls in October, November or December 2022, the “11th month” revision must be submitted to the IRB before 31 October 2022

The application form is available on the IRB’s website as follows:
www.hasil.gov.my -> Forms -> Download Forms -> Other Forms -> Borang Permohonan Pindaan Anggaran Cukai Bulan Ke-11 Tempoh Asas Bagi Tahun Taksiran 2021/2022

The FAQs are available at the following link:

Pindaan Anggaran Cukai Kena Dibayar (CP204) Pada Bulan Ke-11 Tempoh Asas Bagi Tahun Taksiran 2021 Dan 2022 Dan Penangguhan Bayaran CP204 Dan Skim Bayaran Ansuran (CP500) Bagi Perusahaan Mikro Kecil Dan Sederhana (PMKS) Mulai 1 Januari 2022 Hingga 30 Jun 2022 Di Bawah Bajet 2022


APPENDIX III

Revision of estimate of tax payable in the 11th month of the basis period for YA 2021 and YA 2022 – UNOFFICIAL TRANSLATION ONLY. PLEASE ALSO REFER TO OFFICIAL BAHASA MALAYSIA VERSION 

No. Question IRB’s response
1. Which industries are eligible to apply for the revision of estimate of tax payable in the 11th month of the basis period for YA 2021 and YA 2022? All industries are eligible
2. Is this 11th month revision specifically for YA 2021 and YA 2022 only? Yes
3. Is this 11th month revision only allowed if the revised estimate of tax payable is higher than the initial or revised estimates of tax payable (i.e., in the sixth or ninth month of the basis period)? No. The 11th month revision is allowed regardless whether it is higher or lower than the initial or revised estimates of tax payable (i.e., in the sixth or ninth month of the basis period).
4. If a taxpayer is late in applying for his revised estimate of tax payable in the 11th month of the basis period for YA 2021 and/or YA 2022, can the taxpayer apply for a revised estimate of tax payable in the 12th month of the basis period? No, as the initial estimate of tax payable (CP204) for YA 2022 and/or YA 2023 should have already been submitted by then.
5. Does this 11th month revision refer to a revision in “the month of the 11th monthly tax instalment” or “11th month of the basis period”? This 11th month revision refers to the 11th month of the basis period for YA 2021 and YA 2022.
6. Must the revised estimate of tax payable for this 11th month revision be higher than 85% of the initial or revised estimate of tax payable for the immediate-preceding YA? No
7. Must the initial estimate of tax payable for YA 2022 be at least 85% of the revised estimate of tax payable submitted in this 11th month revision?  No. The initial estimate of tax payable for YA 2022 must not be less than 85% of the initial or revised estimate of tax payable in the sixth or ninth month of the basis period for YA 2021.
8. Will the underestimation penalty under Section 107C(10) of the ITA be imposed if the company’s final tax liability per the tax return exceeds the revised estimate of tax payable by more than 30% of the final tax? Yes. If the company’s final tax liability per the tax return exceeds the revised estimate of tax payable in the sixth or ninth month of the basis period by more than 30% of the final tax, the amount in excess of 30% will be subject to a 10% penalty.
9. Does the taxpayer have to wait for IRB’s approval for the application of this 11th month revision? No. However, the application must be in order and the relevant conditions must be satisfied. 
10. When is the due date for the application of this 11th month revision? The due date is on the last day of the 11th month of the basis period for YA 2021 and/or YA 2022. 

Examples:
  
  YA 2021
Basis period 1 January 2021 -
31 December 2021
11th month of the basis period November 2021
Due date for the application of the revision 10 December 2021
Effective date of the revision 15 December 2021
 
  YA 2022
Basis period 1 July 2021 -
30 June 2022
11th month of the basis period May 2022
Due date for the application of the revision 31 May 2021
Effective date of the revision If the application is received after the 15th of the 11th month of the basis period, the revision is effective for the instalment due on the 15th of the following month
Where the 11th month of the basis period falls in October, November or December 2022, the due date for the 11th month revision is before 31 October 2022.
11. Can a taxpayer who is eligible for the CP204 deferment from January 2022 to June 2022 apply for the 11th month revision for YA 2021 and YA 2022?  Yes
12. How may one apply for the 11th month revision?

The application form must be completed and submitted via e-mail to pindaancp204bajet2022@hasil.gov.my

The application form is available on the IRB’s website as follows:

www.hasil.gov.my -> Forms -> Download Forms -> Other Forms -> Borang Permohonan Pindaan Anggaran Cukai Bulan Ke-11 Tempoh Asas Bagi Tahun Taksiran 2021/2022 
13. Are any supporting documents required for the application of the 11th month revision? No
14. Does Part B (Akuan) of the application form need to be completed if the taxpayer submits the application form himself? Yes 

APPENDIX IV

Deferment of payment of estimated tax payable (CP204) and instalment scheme (CP500) for MSMEs from 1 January 2022 to 30 June 2022 – UNOFFICIAL TRANSLATION ONLY.  PLEASE ALSO REFER TO OFFICIAL BAHASA MALAYSIA VERSION

No. Question IRB’s response
1. What are the criteria for a business to qualify as an MSME?

The company must have:

  • Paid-up ordinary share capital of RM2.5 million or less at the beginning of the basis period, and
  • Gross income from business sources of not more than RM50 million for the relevant YA
2. Do taxpayers have to apply for the deferment of CP500 payments? No. Taxpayers who have to remit CP500 payments are allowed to defer the payments due between 1 January 2022 and 30 June 2022.
3. Is the deferment of CP204 payments applicable to all basis periods or limited to basis periods ending on 31 December 2022 only? The deferment of CP204 instalment payments is applicable to all basis periods, as long as the instalment payments are due between 1 January 2022 and 30 June 2022.
4. How is the eligibility for the deferment of CP204 instalment payments determined? The eligibility for deferment is based on the response to the MSME criteria (refer Q1) indicated in the latest income tax return form received by the IRB.
5. Will taxpayers who are eligible for the deferment of CP204 and CP500 payments be required to settle the deferred payments all at once after the deferment period ends? No. The payment is to be made upon submission of the income tax return form for the relevant YA if there is any balance of taxes to be paid.
6. Will the increase in taxes under Sections 107B(3) or 107C(9) of the ITA be imposed on taxpayers who have deferred their CP204 or CP500 payments? No. The increase in taxes under Sections 107B(3) and 107C(9) of the ITA will not be imposed in cases where payments are remitted after the relevant due date, during the deferment period.
7. Can CP204 or CP500 payments that have been remitted during the deferral period be carried forward to offset instalment payments which are due after the deferment period? No. The payments will not be allowed to be carried forward to offset instalment payments which are due after the deferment period or the next YA. The increase in taxes under Sections 107B(3) and 107C(9) of the ITA will not be imposed as well for late payments during the deferment period.
8. Can a taxpayer choose to decline the automatic deferment of CP204 or CP500 payments and continue to remit the payments per the original instalment payment schedule? If yes, does the taxpayer need to inform the IRB? Yes. Taxpayers can decline and continue remitting the CP204 or CP500 payments per the original payment schedule without having to inform the IRB.
9. Will IRB issue a notification to taxpayers who are eligible for the deferment of CP204 and CP500 payments? The IRB will inform eligible taxpayers of the deferment of their CP204 payments via their e-mails registered with the IRB. However, no notification will be sent for the deferment of CP500 payments as all CP500 payments due between 1 January 2022 and 30 June 2022 can be deferred  
10. Can a taxpayer appeal if he is eligible for the deferment of CP204 payments based on his current MSME status? Yes. Taxpayers can submit an appeal to penangguhancp204@hasil.gov.my
11. Can a taxpayer who is eligible for the deferment submit an amendment to the CP204 in the sixth, ninth or 11th month of the basis period that falls within the deferment period, or make amendments to CP500 before 30 June 2022? Yes
12. Will taxpayers who are required to remit CP500 instalment payments still receive a Form CP500 for YA 2022? Yes. However, taxpayers are not required to remit the payments due during the deferment period (i.e., January, March and May 2022).

The FAQs also provide two examples to demonstrate the manner in which the deferment of payment of estimated tax payable (CP204) and under an instalment scheme (CP500) would work.

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