Taxpayers who fall behind on their CP500 tax instalments will not be barred from travelling abroad because of the missed payments, Deputy Finance Minister Liew Chin Tong told the Dewan Rakyat on Wednesday (Nov 11).
“Failure to settle CP500 instalments does not result in taxpayers being subjected to an overseas travel ban,” he said during Question Time, explaining that CP500 is not a final tax assessment.
Liew was replying to Chow Yu Hui (PH-Raub), who asked whether the Inland Revenue Board (LHDN) could restrict overseas travel over unpaid CP500 instalments, the legal basis for doing so and how many people had been affected.
CP500 is LHDN’s instalment scheme for individuals with income other than employment income, such as rental income, royalties and business profits, who pay estimated tax in instalments every two months.
Liew said a taxpayer’s actual tax liability is determined only after the income tax return form is submitted for the relevant year of assessment. The tax payable is then recalculated after deducting the CP500 instalments already paid, and only a balance that is not settled within the stipulated period becomes outstanding tax.
Travel restrictions are imposed only after the tax return has been finalised, generally after six months without payment and where the taxpayer has not responded to LHDN, he said. They are enforced by LHDN together with the Immigration Department under Section 104 of the Income Tax Act 1967 for unpaid income tax, or Section 22 of the Real Property Gains Tax Act 1976 for unpaid real property gains tax.
He said the Immigration Department can also impose travel restrictions on people blacklisted by other agencies, including the Royal Malaysian Customs Department and the Insolvency Department, as a way to trace debtors and recover outstanding payments.
LHDN advises taxpayers to check their tax arrears on the MyTax portal, and their travel status on the Immigration Department’s website, before making overseas travel plans.
The clarification matters to the self-employed, landlords and business owners who pay tax through CP500, as it separates missed instalments from tax debts that can lead to a travel ban.