No More Offsetting Overpaid Taxes — Your Cash Flow Is at Risk

Published: 18 November 2025

The Edge Malaysia recently highlighted a major change: companies can no longer offset excess tax payments against future tax liabilities.

This means any overpayment becomes a refund request.

For businesses, this creates a significant cash-flow risk if tax estimates are not prepared accurately.

If You Overpay, Your Cash Gets Stuck With LHDN

Overestimating your company’s estimate tax payable (“CP 204”) results in:

• Higher monthly tax instalments
• Cash being locked with LHDN earning 0% interest
• Tax refund delays that can stretch well beyond a year
• Reduced operating flexibility
• Unnecessary financial strain during volatile economic periods

In short — your cash stops working for your business.

Accuracy is essential to:

• Comply with the 85% minimum estimate rule under Section 107C(3) of the ITA
• Prepare up-to-date management accounts and a budget forecast for the remaining months to facilitate tax estimate revisions in the 6th, 9th, and 11th months via Form CP204A under Section 107C(7) of the ITA
• Manage tax payments efficiently to avoid large tax credit positions that may raise concerns during a tax audit
• Maintain healthy working capital during challenging periods to support your company’s ongoing operations and ensure business continuity
• Prevent liquidity gaps or slowdown cash conversion cycles during operation expansion

A poorly prepared estimate can lock your cash away at the very time you need it most.

Suggested Actions to Take Now

To protect liquidity and ensure tax compliance, businesses should:

1. Review current year actual financial results ✅

Use updated current year financial results to project the upcoming year profitability accurately.

2. Build a cash-flow model ✅

Understand how different CP204 estimates affect your monthly resources.

3. Validate your minimum allowable estimate (85% rule) ✅

Ensure your tax submission meets the requirements as set out in Section 107C of the ITA so to avoid unnecessary underestimation/ late payment penalties.

4. Plan your tax revision schedule ✅

Prepare for CP204A adjustments at the 6th, 9th, and 11th month to manage cash flow.

5. Avoid “safety padding” ✅

Overestimating may feel safe — but it is the fastest way to trap cash with LHDN.

6. Seek professional review ✅

Ensure your CP204 is grounded in financial analysis, not guesswork.

⚠️ Need Help or Not Sure About Your Tax Estimate?

If you have any doubts, are unsure how to project your 2026 tax estimate, or want a professional review to avoid errors:

👉 Call us directly or contact us
👉 Speak to our team
👉 Get clarity before submitting your CP204

We’re here to help ensure your business does not lose cash unnecessarily — and that your tax estimate is accurate, compliant, and optimised.