KUALA LUMPUR, Jan 10 — DAP MP for Bagan, Lim Guan Eng, has urged the Inland Revenue Board (LHDN) to retain the current CP500 tax framework for business and commercial income, and not expand it to individual wage earners.

Lim said the decision to extend the CP500 advance tax payment system to those who already pay monthly tax deductions (PCB) had sparked widespread public dissatisfaction, with taxpayers feeling they were being “squeezed dry”.

He stressed that LHDN should not impose new, unfair burdens on individual taxpayers and wage earners.

“Under CP500, taxes must be paid in advance through six instalments, with amounts imposed in an arbitrary manner on individual taxpayers who are already paying PCB, instead of allowing a lump-sum payment at the end of the year,” he said in a statement.

Lim noted cases where individuals were taxed for rental income despite not owning any property or earning rental income. He also highlighted that charitable organisations were required to pay both the Sales and Service Tax (SST) and CP500, reinforcing the perception that taxpayers were overburdened.

He added that the one-year penalty exemption in 2026 for non-compliance with CP500 is not a blanket exemption, as it only applies to wage earners who pay PCB.

“Even then, the penalty exemption for PCB taxpayers in 2026 is not automatic and must be applied for with LHDN,” Lim said, advising PCB taxpayers to seek clarification directly from the tax authority.

Lim warned that this requirement could cause significant inconvenience to the public, including long waiting times at LHDN offices.

He further explained that non-PCB taxpayers who have just received CP500 notices would still be required to pay the six instalments in 2026 or face penalties.

“All individual taxpayers, including wage earners paying PCB, will be required to comply with CP500 by making six advance tax prepayments next year,” he said.

Lim reiterated that the best solution is to limit CP500 to business or commercial income and not extend it to individual taxpayers.

“This is necessary to prevent the imposition of unfair new burdens on individual taxpayers and wage earners,” he said.