What is the penalty if my CP204 estimate is too low?
For companies the penalties sit in s.107C. If tax payable exceeds the latest estimate by more than 30% of the tax payable, 10% is charged on the part of the excess above that 30% (s.107C(10)). An instalment not paid by its due date carries 10% of the unpaid amount (s.107C(9)). With no estimate at all, 10% is added to the tax payable.
For companies, the CP204 penalties are in s.107C. The matching s.107B(3) and (4) apply to individuals and others who pay by instalments.
Late instalments (s.107C(9)). An instalment not paid by its due date (the 15th of the month) is increased by 10% of the unpaid amount. Individuals get 30 days under s.107B(3); companies get no such grace period.
Under-estimation (s.107C(10)). Compare the tax payable under the assessment with the latest estimate (the original if never revised). If the tax payable exceeds it by more than 30% of the tax payable, the penalty is 10% of the amount by which that excess is above 30% of the tax payable.
Example: tax payable RM100,000 and a latest estimate of RM50,000. The excess is RM50,000, 30% of the tax payable is RM30,000, so the penalty is 10% of RM20,000, which is RM2,000.
LHDN's penalty table summarises this as "10% on the difference between the actual tax balance and the estimate"; the formula in the Act is the precise one.
No estimate (s.107C(10A)). If a company never furnished an estimate and was not prosecuted for it, 10% is added to the tax payable.
Relief. The Director General may remit these amounts for good cause (s.107C(11)).
How to avoid it
- Revise in months 6, 9 and 11 whenever profit runs ahead of plan; the latest revision is the comparison point.
- Keep management accounts current.
- Do not set the estimate below the 85% floor from the second year.
These penalties are separate from late filing and late payment penalties.
Legal basis
- Income Tax Act 1967, s.107C(9), (10), (10A) and (11)
- Income Tax Act 1967, s.107B(3) and (4) (individuals)
Sources
Applies to YA 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- What is the penalty for not issuing e-invoices in Malaysia?Non-compliance can be prosecuted under s.120(1) of the Income Tax Act, with a fine of RM200 to RM20,000, up to six months in prison, or both. LHDN will not prosecute during the relaxation period if the consolidated e-invoice conditions are met, and has a voluntary disclosure programme to 31 December 2027.
- How far back can LHDN audit my company or raise additional tax?LHDN can generally raise an additional assessment within five years after the end of the year of assessment, and seven years for transfer pricing. These limits do not apply to fraud, wilful default or negligence.
- What should I do when LHDN sends my company an audit or query letter?Read the deadline, appoint a tax adviser if needed, collect the documents requested, reply on time, and correct any errors you find. Ignoring a notice for information can itself be an offence with a fine of RM200 to RM20,000.
- What is the penalty for understating income or giving incorrect information on a tax return?On prosecution, s.113(1) carries a fine of RM1,000 to RM10,000 plus 200% of the tax undercharged. Wilful evasion under s.114 can mean 300%, a fine of RM1,000 to RM20,000 and up to three years in prison. LHDN can instead require a penalty of 100% of the tax undercharged under s.113(2).
- What is the corporate tax rate for a small company in Malaysia?A Malaysian resident company normally pays 24% income tax. A company that meets the SME conditions pays 15% on the first RM150,000 of chargeable income, 17% on the next RM450,000 (up to RM600,000), and 24% on anything above that.