Corporate income tax for Malaysian SMEs: rates, Form C and CP204
How much tax does a Malaysian Sdn Bhd pay, and when? The SME rates and their conditions, the Form C deadline, and how CP204 monthly instalments and penalties work.
A qualifying Malaysian SME company pays income tax at 15% on its first RM150,000 of chargeable income, 17% on the next RM450,000 and 24% on the rest. Other companies pay 24%. Companies estimate their tax on Form CP204, pay it in monthly instalments, and file Form C (e-C) within seven months of their financial year end.
For many Malaysian business owners, company tax is something the accountant handles once a year. The trouble is that the costly mistakes, such as a low CP204 estimate or a missed instalment, happen during the year. This guide explains how corporate income tax (cukai pendapatan syarikat) works for a small Sdn Bhd as of October 2026, so you know what your tax agent is asking you for and why.
What is the corporate tax rate for SMEs in Malaysia?
A qualifying small and medium company pays tiered rates of 15%, 17% and 24%. Companies that don't qualify pay a flat 24% on chargeable income. These tiers have applied from YA 2023.
| Chargeable income | Rate for qualifying SME companies |
|---|---|
| First RM150,000 | 15% |
| RM150,001 to RM600,000 | 17% |
| Above RM600,000 | 24% |
| All chargeable income, non-qualifying companies | 24% |
Chargeable income is your profit after tax adjustments, such as adding back non-deductible expenses and claiming capital allowances instead of depreciation. It is not the same as the profit in your accounts.
Which companies qualify for the SME tax rate in Malaysia?
A company (or limited liability partnership) gets the tiered rates only if it meets all the conditions in LHDN's Public Ruling No. 8/2025. The main ones are:
- Paid-up ordinary share capital of RM2.5 million or less at the beginning of the basis period for the year of assessment;
- Gross income from business sources of RM50 million or less for the basis period; and
- from YA 2024, not more than 20% of its paid-up ordinary share capital is owned, directly or indirectly, by foreign companies or by individuals who are not Malaysian citizens, at the beginning of the basis period.
There are further conditions about related companies. Broadly, a company can lose the SME rate because of the size of companies it is related to. If your company is part of a group, or has foreign shareholders, check the ruling with your tax agent rather than assuming you qualify.
How much tax will my company pay? Two examples
A Klang Valley trading company (Sdn Bhd, qualifying SME) has chargeable income of RM400,000 for YA 2026.
- 15% × RM150,000 = RM22,500
- 17% × RM250,000 = RM42,500
- Total tax: RM65,000
At the flat 24% rate, the same income would be taxed RM96,000. That RM31,000 gap is why it matters whether a company still meets the SME conditions, especially after bringing in a foreign investor or increasing share capital.
A Penang café run through a qualifying Sdn Bhd has chargeable income of RM120,000. All of it falls in the first band, so tax is 15% × RM120,000 = RM18,000.
What is Form C and when is it due?
Form C is the annual income tax return for companies, filed online as e-C through LHDN's MyTax portal. It is due within seven months after the end of the company's accounting period. Any balance of tax not covered by your instalments is also due by that date.
For a company with a 31 December 2025 year end (YA 2025), that means Form C and any balance of tax are due by 31 July 2026.
From YA 2025, companies and LLPs must also submit supporting documents to LHDN under section 82B of the Income Tax Act through the Malaysian Income Tax Reporting System (MITRS) on MyTax. These include the financial statements (audited or unaudited) and the tax computation, in PDF, within 30 days after the Form C due date. Late submission can attract a fine of RM200 to RM20,000, imprisonment of up to six months, or both.
What is CP204 and how do the monthly instalments work?
CP204 is your company's estimate of the tax it will pay for the coming year. LHDN collects company tax in advance through monthly instalments based on that estimate, rather than all at once when Form C is filed.
The key deadlines:
| Item | When |
|---|---|
| CP204 estimate, existing company | No later than 30 days before the basis period starts |
| CP204 estimate, newly operating company | Within three months of starting operations |
| Monthly instalment | On or before the 15th of each month, from the second month of the basis period (the sixth month for a new company) |
| Revised estimate (e-CP204A) | In the 6th, 9th or 11th month of the basis period |
Your estimate generally can't be less than 85% of the previous year's revised estimate (or original estimate, if you didn't revise).
New SMEs get a break. A newly started company with paid-up capital of RM2.5 million or less is not required to submit a CP204 estimate for its first two years of assessment, under section 107C(4A) of the Income Tax Act. Conditions apply, including about related companies, so confirm with your tax agent.
What happens if my CP204 estimate is too low?
If your actual tax is more than 30% higher than your final estimate, LHDN adds a 10% penalty on the amount above that 30% margin. LHDN's formula is:
Penalty = [(actual tax − estimated tax) − (30% × actual tax)] × 10%
Example: The Klang Valley trading company estimated RM40,000 but its actual tax is RM65,000. The shortfall is RM25,000. 30% of RM65,000 is RM19,500. The penalty is (RM25,000 − RM19,500) × 10% = RM550.
That is why the 6th, 9th and 11th-month revisions matter. If sales are running well ahead of plan, revising upwards in the 9th or 11th month costs nothing extra and avoids the penalty.
Other penalties to know:
- Late instalment: 10% on the instalment amount not paid by the 15th.
- Late balance of tax: 10% on the amount outstanding after the Form C due date.
How do I keep my company tax under control during the year?
- Keep your books current. You can't revise CP204 sensibly in month 9 if your accounts are three months behind. Software that posts double-entry books straight from your invoices and bills, such as HumbleBear's accounting software, makes a quick mid-year profit check realistic.
- Check your SME status every year. Share capital changes, new foreign shareholders and group restructures can all remove the SME rate.
- Diary the dates: the CP204 deadline, the 15th of every month, your revision months, the Form C deadline and the MITRS deadline 30 days later.
- Keep your records for seven years. See how long Malaysian businesses must keep records.
Sole proprietors and partnerships are not taxed this way. Their business profit is taxed as the owner's or partners' personal income, on a different return form.
Frequently asked questions
Do limited liability partnerships (LLPs) get the SME tax rate?
Yes, if they qualify. LHDN's Public Ruling No. 8/2025 applies the same tiered rates to LLPs, using a capital contribution of RM2.5 million or less in place of paid-up share capital, alongside the gross income and foreign ownership conditions.
Can my company lose the 15% and 17% SME rates?
Yes. The rates only apply if the company meets every condition at the beginning of the basis period, including paid-up capital of RM2.5 million or less, gross business income of RM50 million or less, and, from YA 2024, foreign ownership of 20% or less. Related-company conditions can also disqualify it.
What is the difference between CP204 and Form C?
CP204 is an estimate of the coming year's tax, submitted before the year starts and paid in monthly instalments. Form C is the actual return, filed after the year ends, which calculates the real tax. Any difference is settled when Form C is due.
When can I revise my CP204 estimate?
In the 6th, 9th or 11th month of the basis period, using form e-CP204A. Revise when your expected profit has changed significantly, especially upwards, to avoid the underestimation penalty.
Is the company tax rate the same as the personal tax rate?
No. Companies pay corporate income tax at 15%, 17% or 24%. Sole proprietors and partners pay personal income tax on their business profit at the individual scale rates, which is one reason some owners consider incorporating as their profits grow.
