By DayakDaily Team
KUCHING, Jan 23: The Ministry of Finance has been urged to urgently review the application of the CP500 tax instalment scheme to ensure it does not unfairly penalise salary earners who already pay monthly income tax through Monthly Tax Deductions (PCB) under the Pay-As-You-Earn (PAYE) system.
In a press statement today, Sarawak United Peoples’ Party (SUPP) Stakan branch chairman Dato Sim Kiang Chiok called for CP500 to be limited strictly to full-time businesses, warning that its current application results in a form of double tax pre-collection for salaried individuals with rental income or small side businesses.
“Salary earners are already paying income tax every month through PCB, long before their annual tax filing. When CP500 is imposed on the same individuals merely because they have rental income or small business activities, it results in a form of double pre-collection of tax within the same year,” he said.
CP500 is an income tax instalment scheme that requires taxpayers with non-employment income, such as business profits or rental income, to pay estimated income tax in advance through six bi-monthly instalments within the same assessment year, based on projected earnings rather than actual income.
Sim said the practice is neither equitable nor reflective of the cash flow realities faced by working Malaysians, particularly those in the middle-income group who rely on side income to supplement their earnings.
He pointed out that CP500 requires advance tax payments even when business or rental income is irregular, seasonal, or in some months non-existent.
“Worse, instalments are still payable even when the business incurs losses or when rental properties remain vacant. This creates unnecessary cash flow strain, especially for middle-income salary earners who invest or operate small side businesses,” he added.
According to Sim, such a system discourages entrepreneurship and investment, sending the wrong signal to Malaysians who wish to invest in rental properties or start small businesses.
“It implies that they will be taxed in advance regardless of actual performance. Over time, this undermines the national agenda of promoting private investment, entrepreneurship, and wealth creation,” he said.
He stressed that for salary earners, tax on non-employment income should be assessed and paid at the end of the financial year based on actual profits, rather than projected figures.
“CP500 should be confined to full-time businesses where income is continuous and predictable, and where PCB does not apply,” he said.
Sim urged the Ministry of Finance to act decisively, saying a fair and pro-growth tax system must recognise real cash flow conditions.
“Penalising salary earners who invest or do business will only make Malaysia a less attractive place for investment and enterprise. I urge the Ministry of Finance to act in the interest of fairness, economic growth, and taxpayer confidence,” he said. — DayakDaily
