Individual taxpayers who have received Instalment Payment Notices (CP500) from the Inland Revenue Board (LHDN) will not face penalties throughout 2026. Prime Minister Datuk Seri Anwar Ibrahim announced the penalty-free period on 5 January 2026, covering unintentional errors in CP500 filings for the 2026 Assessment Year (AY).

LHDN stated the waiver gives individual taxpayers with income from employment and non-employment sources, such as rental income, interest, and royalties, time to comply with CP500 requirements.

Voluntary Payments Still Encouraged

Taxpayers are still encouraged to make voluntary CP500 payments to help reduce their outstanding tax liability when filing the Income Tax Return (ITR) later, according to LHDN.

Voluntary instalment payments can lower the final tax bill when filing returns, even though penalties have been waived for 2026.

Employment Income Holders Not Affected

Taxpayers with only employment income are not required to comply with the instalment payment directive. LHDN advised these individuals to update their income reporting in the ITR for AY 2025 to avoid receiving CP500 instalment notices in future years.

LHDN will contact affected taxpayers to clarify any income reporting errors in previously submitted ITRs.

Deadlines For CP500 Revisions

Taxpayers seeking to revise their CP500 instalment amounts via Form CP502 must submit any first revisions by 30 June 2026, and any second revisions by 31 October 2026.

LHDN encouraged taxpayers to accurately and correctly report their income in the ITR to ensure more efficient and orderly tax management.

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