New CP 204 Tax Instalment Rules for Companies - One Year of Tax Must Now Be Paid Within the Same Year

(TAX UPDATE) New CP 204 Tax Instalment Rules for Companies - One Year of Tax Must Now Be Paid Within the Same Year

Introduction

Under the latest Finance Bill, LHDN will restructure the tax instalment schedule for companies and LLPs..
The goal is tax administration efficiency to ensure that instalments for a Year of Assessment (YA) are fully paid within the same basis period, instead of spilling into the following year.

This change takes full effect from YA 2028, with a one-off transitional arrangement for YA 2027.

Key Summary

1. Current Practice

The first instalment starts in the second month of the basis period.
The final instalment extends into the first month of the next YA.

2. New Rule (Effective YA 2028)

The first instalment will start earlier, in the first month of the basis period.
All instalments will finish within the same YA, avoiding cross-year payments.
Objective : align one year’s tax payments with the same financial and tax period.

3. Transitional Rule for YA 2027

Instalments begin in the second month, as before.
To complete within the same year, instalments are limited to 11 months only.
From 2028 onward: full 12 months, beginning from Month 1.

SME Implications

Cleaner tax administration
A full cycle of CP204 instalments will align with the financial year, making reconciliations, audits, and tax computation easier.
Better alignment with accounting records
No more instalments reflected in two different financial/tax periods.
Accountants will find monthly reporting and year-end closing more consistent.

KTP’s View

This change is mainly administrative ie align one year of tax with one year of books.
It reduces reconciling issues and closes gaps between accounting periods and tax instalments.

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