Form CP58 in Malaysia
In Malaysia, the Statement of Monetary and Non-Monetary Incentive Payment to an Agent, Dealer or Distributor (“Form CP58”) is a prescribed statement that a company is required to issue to agents, dealers, or distributors (“ADDs”) in respect of incentives provided during a given Year of Assessment (“YA”). These incentives may be in the form of cash payments or non-cash benefits arising from commercial agreements.
Form CP58 applies specifically to non-employment income and is distinct from employment-related reporting such as Form EA. It forms part of the statutory reporting requirements under the Income Tax Act, 1967 (“the Act”) in relation to incentives provided by companies to independent parties.
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Purpose of Form CP58
Form CP58 is issued to report monetary and non-monetary incentives provided by a company to ADDs in the course of carrying out commercial activities. These incentives arise from business relationships and are not treated as employment income.
The purpose of Form CP58 is to record the total incentives provided to ADDs during a given YA, ensuring that such payments are properly documented for tax reporting purposes. The information disclosed in the Form CP58 forms the basis for ADDs to report the corresponding income in their income tax returns.
For companies, the issuance of Form CP58 establishes a consistent record of incentive payments made to independent parties and supports compliance with the reporting requirements under Section 83A of the Act.
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Content of Form CP58
Form CP58 provides a structured summary of all monetary and non-monetary incentives paid or granted to ADDs during a YA. Accurate reporting ensures that ADDs have correct information for tax purposes and that companies maintain proper documentation for compliance with the Act.
The main components of Form CP58 are as follows:
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Part
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Component
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Description
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A
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Payer company’s particulars
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Name
Address
Registration number
Income tax number
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B
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Recipient’s particulars
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Name
Address
Registration / identity card /
police / army / passport number
Income tax number
Resident in Malaysia
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C
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Particulars of incentive
payment
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Monetary incentive: Commission,
bonus, others
Non-monetary incentive:
Vehicle, house, tour/travel package, others
2% tax deduction under Section
107D of the Act
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All figures reported in Form CP58 must align with the company’s financial records. For non-cash incentives, the value should reflect either the actual cost to the company or the market value of the benefit. Proper completion of Form CP58 facilitates transparency and ensures compliance with the Act.
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Withholding Tax on Incentive Payments (2%)
Under Section 107D of the Act, companies are required to apply a 2% withholding tax (“WHT”) on monetary and non-monetary incentives paid to ADDs and remit the amount to the Inland Revenue Board of Malaysia.
The 2% WHT is only applicable when the total payment made to an ADD exceeds RM100,000 in the previous year.
For more detailed guidance on the 2% WHT, please refer to our previous publication at https://www.kaizencpa.com/Knowledge/info/id/1987.html .
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Requirement to Issue Form CP58
A company is only required to prepare and issue Form CP58 to ADDs when the total incentives paid exceed RM5,000 in a year. It is not mandatory to issue the Form CP58 to ADDs who receives less than RM5,000, unless the ADD requests for it.
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Distribution deadline and penalties
A company must issue Form CP58 to qualifying ADDs by 31 March following the end of the relevant YA. Timely issuance ensures that ADDs have sufficient time to verify the accuracy of reported incentives and use the information as reference in their income tax returns.
Failure to prepare and deliver the Form CP58 to the ADDs within the stipulated deadline would constitute an offence under Section 120(1)(b) of the Act for which an employer could be prosecuted. Upon conviction, the payer will be liable to a fine of not less than RM200 and not more than RM20,000, or to imprisonment for a term not exceeding 6 months or both.
For further information, please visit the official website of the Inland Revenue Board of Malaysia at
https://www.hasil.gov.my/en
KAIZEN Group, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professional accountants in Kaizen for further clarification.
KNOWLEDGE
