CP204 Tax Estimates: How to Estimate, When to Revise, and the 10% Penalty
2026-06-10
Companies get penalised over CP204 every year — not for failing to pay tax, but for estimating it wrong. Here are the rules, and how to avoid the penalty.
What is CP204?
A Malaysian company (Sdn Bhd) must submit an estimate of tax payable (CP204) no later than 30 days before the start of its financial year, then pay it in monthly instalments (from the 2nd month of the year, by the 15th of each month).
New companies: submit the first CP204 within 6 months of commencing operations. SMEs are exempt from submitting for their first two years of assessment.
The 85% rule
Your estimate cannot be lower than 85% of the previous year's estimate (or revised estimate).
If last year's estimate was RM100,000, the lowest you can submit this year is RM85,000. The system will not accept less.
Revision windows: months 6, 9 and 11
If the year is going differently than expected, you can revise via CP204A in the 6th, 9th and 11th month of the financial year (the 11th-month window was added from 2024).
- Business better than expected → revise upward to avoid the year-end penalty
- Business declining → revise downward to improve cash flow
After a revision, remaining instalments are recalculated on the new estimate.
How the underestimation penalty works
When actual tax payable exceeds 130% of your estimate (i.e. you estimated below ~70% of actual), the excess above 130% is penalised at 10%.
Example: estimate RM50,000, actual tax RM100,000.
- 130% × RM50,000 = RM65,000
- Excess: RM100,000 − RM65,000 = RM35,000
- Penalty: RM35,000 × 10% = RM3,500
This penalty is not tax-deductible. It's pure loss.
Late instalment penalty
Each instalment paid late attracts a 10% penalty on that instalment. There is no grace period — after the 15th it's late.
Practical advice
- Estimate accurately rather than deliberately low — the 10% penalty costs more than the cash-flow benefit
- Reconcile quarterly — take management-account profit × 24% as a rough check against your estimate
- Use the month-9 and month-11 windows — by then the year's results are mostly clear; it's your last chance to correct
- SMEs: remember the 2-year exemption — new companies with paid-up capital ≤ RM2.5M and turnover ≤ RM50M skip CP204 for the first two years
Want to simulate your instalments and the underestimation penalty? Use our CP204 calculator.