12/01/2026

BIZ & FINANCE MONDAY | JAN 12, 2026

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Clearing the misconceptions over CP500 CP500 has been in place for many years and it is not a new initiative by the

Shifts underscore structural transition in economy settle the bimonthly obligation under the CP500 regime, there will be no penalty, and the taxpayer must pay the outstanding tax liability when submitting the tax return in the subsequent year. There is a false rumour that this information was obtained from the information received for e-invoicing purposes. The source of the information for the CP500 is solely obtained from the individual’s previous year’s tax return. Be prepared to pay your taxes in advance Now that you have been given a one-year grace period, it is advisable to organise your cash flow for future years to settle the CP500 payment. Paying taxes in advance by individuals or corporate is not unique to Malaysia. Most countries in the world collect their taxes on a current year basis as the income is earned. This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com). border financial obligations. The emerging trends point to a domestic economy that is gradually regaining confidence, supported by improving consumer behaviour, tar geted policy interventions and shifting financial flows. On the consumer front, spending patterns are evolving beyond essentials, with evidence of basket upgrading, higher discretionary activity and renewed appetite for travel and imported goods – signals that confidence is returning, even if cautiously. This recovery has been reinforced by government support measures and a more resilient macroeconomic back drop than initially expected. At the same time, remittance data highlights a more nuanced picture of Malaysia’s foreign labour dynamics. While overall remittance volumes have moderated, behavioural shifts – particularly the move from informal to formal channels and the increased use of digital platforms – suggest adaptation rather than withdrawal. Collectively, these developments underscore a broader structural tran sition within the economy – one where domestic demand, financial formali sation and digital adoption play an increasingly central role. As currency strength, policy con tinuity and economic performance intersect, the key question ahead is not whether behaviour is changing, but whether these shifts can be sustained to support longer-term income growth, investment quality and economic resilience. From page 13 “What we are observing is not an exit, but an adaptation,” Ivan said, pointing to a more nuanced evolution in how migrant workers manage earnings and cross

Since the declaration was incorrect, it is likely that the computer system would have picked up all the income from the previous year as other income and automatically produced a CP500. Corrective action In the event employment income such as bonus payment has been incorrectly declared, the taxpayer should take immediate action to rectify it by either completing Form CP502 or writing in to the IRB to inform it of the error and request the IRB to amend the CP500. The IRB has responded and made it clear in a media statement that it will proactively contact the taxpayers to clarify the reporting errors and correct the situation. Penalty waiver and one-year grace period The government has announced a one-year penalty waiver for taxpayers to ease the transition of taxpayers into the CP500 regime. Effectively, if the individual taxpayer is unable to

the final tax liability. The benefit of both mechanisms is to lessen the burden on taxpayers when they finally file their tax return in the following year. Why are individual taxpayers raising concerns now? In the past, taxpayers who received the CP500 were generally individuals who did not earn employment income. CP500 received recently came as a surprise to many individuals taxpayers who were earning both employment income and other income such as rental, interest, etc. This group did not receive the CP500 previously. The other reason for employees receiving CP500 was due to incorrect reporting of their income in their tax return. The error would have arisen, for example, if allowances, bonuses and other payments received by the employees were not included under the employment category when filling the Form BE in the previous year.

Inland Revenue Board (IRB). In the past, individual taxpayers with income other than from employ ment – such as rental, royalty and interest – have been issued with the CP500. Effectively, the CP500 is equivalent to the Monthly Tax Deduction (MTD) that is applied to individuals with employment income. The CP500 mechanism and the monthly deduction mechanism are intended to collect the relevant tax in advance during the year in which you earn the income. The money collected under MTD and CP500 is an advance tax which will automatically set off the actual tax payable upon the filing of the tax return in the following year. For example, an employee’s income for the year ended Dec 31, 2025 will be filed by May 15, 2026 and the tax collected during 2025 under MTD or CP500 will be set off against

‘E-invoicing delay good news for SMEs but has implications’ o Economists caution against repeated extensions as it could erode trust in government planning

business implications. Ferlito said prioritising operational smoothness for SMEs is more important than strict adherence to digitalisation goals or tax efficiency. “I don’t see e-invoicing as a game changer in the overall fiscal strategy,” he said, adding that government revenue is unlikely to be significantly affected in the short term. Ida said while the delays might not directly affect foreign investors’ perceptions, multiple postponements could have an indirect influence. “I hope this is the only case where delays occur,” she said, pointing out that repeated deferments risk reducing confidence in government planning. The government has also raised the threshold for service tax on rental services from RM1 million to RM1.5 million in total annual sales. Ferlito described the move as “not too significant” but helpful. Ida said any reduction in tax obligations is welcomed by SMEs, though she stressed the need for balance with government revenue needs to fund development and operations. “From the perspective of businesses, definitely, we love it. But from the government’s perspective, they need to collect taxes to run and develop the country.” The economists agree that while SMEs gain immediate relief and preparation time, the government must ensure clear, consistent planning going forward. “At the first place, we need to do good planning,” Ida said. “If it cannot be done, why announce it early only to delay it later?” For now, the postponement gives SMEs a reprieve, allowing them to focus on operations while gradually building digital readiness. But both experts warned that the government’s next steps in e-invoicing and broader digital initiatives will be closely watched by businesses and investors alike.

Ű BY DEEPALAKSHMI MANICKAM sunbiz@thesundaily.com

PETALING JAYA: The government’s decision to postpone mandatory e-invoicing for companies with annual sales between RM1 million and RM5 million has brought a sigh of relief for many small and medium enterprises, but experts caution that repeated delays could have wider implications. The move, announced by Prime Minister Datuk Seri Anwar Ibrahim during his New Year’s address, extends the original mandatory rollout deadline of Jan 1, 2026, by a year. The prime minister said some companies were “still not ready because the cost of preparation is quite high”. Putra Business School Associate Professor Dr Ida Yasin said the delay gives SMEs more breathing room to prepare, particularly for digital adoption. “From the perspective of the SMEs, they are happy because they can have more time for preparation,” she said. However, she noted that repeated post ponements can erode trust in government planning. “If we have repeated delays, sometimes the trust is reducing too,” Ida said, adding that careful initial planning could have avoided the need for multiple extensions. Center for Market Education CEO Dr Carmelo Ferlito described the postponement as “good news” for SMEs, highlighting that compliance burdens currently outweigh the expected benefits of e-invoicing. “A total exemption would have been better, but at least the postponement allows firms to

balance compliance tasks with core business operations, which is what really matters,” he said. On compliance costs, Ferlito emphasised indirect costs over direct financial outlays. “The complexity of the system and the time spent on implementation and testing are significant,” he said, adding that smaller firms can now benefit from the experience of larger companies and professional consultants. Ida acknowledged that while SMEs benefit from the delay, it slows the intended impact on government tax collection and digitalisation initiatives. She noted the government has earmarked funds in Budget 2026 for SME digitalisation training and programmes. “What is important is the implementation or the rollover of the plans.” Both experts weighed in on the broader Ida (left) and Ferlito agree that while SMEs gain immediate relief and preparation time, the government must ensure clear, consistent planning going forward.

Malaysia Airlines celebrates resumption of direct flights to Chengdu PETALING JAYA: Malaysia Airlines has restarted flights from Kuala Lumpur to Chengdu, reinforcing its long-term commitment to the Greater China market, strengthening The inaugural flight, MH526, which departed from Kuala Lumpur International Airport Terminal 1 to Chengdu Tianfu International Airport on Friday, saw strong demand, achieving an impressive load factor of 91%. Chengdu, the flight was operated using the airline’s Manchester United-themed aircraft livery, adding a celebratory touch to the occasion.

in the market. Operating up to seven times weekly, the route is expected to support growing two-way travel demand and strengthen business and leisure connectivity and offer passengers seamless onward connections via Kuala Lumpur to destinations across Aseab, South Asia and Australasia.

With the addition of Chengdu, Malaysia Airlines now serves seven destinations across Greater China, reflecting continued confidence

connectivity between Malaysia and western China, and supporting inbound tourism ambitions under Visit Malaysia 2026.

As a special tribute to the strong following of Manchester United among fans in