How to File Taxes for Self-Employed, Freelancers and Gig Workers Malaysia

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I’m sure we’ve all heard the saying one too many times by now, but here it is againnothing is certain except death and taxes.

Yet, as certain as that is, there is always that level of uncertainty that comes with every fiscal season. Probably even more for independents. Therefore, we are here to help dispel those doubts.

Step 0: Do you need to file your taxes?

Like any individual, if your annual income is more than RM34,000 after deducting your EPF contributions, you must declare your taxes. If you have not met this income threshold but already have a previously registered tax record, you must also file your tax return.

Note that the source of your income doesn’t matter – whether it’s gig work or freelance or even rent, royalties, dividends, etc., it matters always as taxable income.

Step 1: Keep track of your earnings

The typical employee does not have to track his income because employers prepare the EA form for him, which is an annual compensation statement. It summarizes the employee’s annual income as well as the EPF and SOCSO contributions for the year.

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However, for those who are self-employed, freelancers or gig workers, you will need to account for your own profits. It’s a good idea to stay organized and on top of your bookkeeping throughout the year for this.

Also, while full-time employees go through the Monthly Tax Deduction (MTD) program where employers make the monthly tax deductions for them, the self-employed do not enjoy this convenience.

Instead, you will have to pay your taxes to Lembaga Hasil Dalam Negeri (LHDN) Malaysia all at once. This lump sum tax payment can be quite large if your income is significant, so be sure to set aside some money for it.

Step 2: Complete your forms

Instead of the EA form, the self-employed will have to complete the BE form. If you are a freelancer who has registered your work as a business, you will complete Form B.

You can easily search for the forms here on the LHDN portal. You can also submit via e-Filing here.

It can be quite intimidating when first approaching forms, but it takes more time than difficulty.

Note that part-time freelancers or gig workers (AKA those who are still employed but take freelance gigs on the side) have a different process than full-time freelancers.

Part-time workers should fill in the income you earn from your day job under “Statutory income from employment”, and the income from your self-employment under “Statutory income from interest, discounts, royalties, pensions, annuities, other periodic payments, and other earnings and benefits.

Self-employed persons will simply list all of their income under “Statutory income from interest, rebates, royalties, pensions, annuities, other periodic payments and other earnings and benefits”.

Step 2.5: Check reliefs and exemptions

Reliefs, deductions and exemptions are our friends. Freelancers get essentially the same relief as normal employees. You can check out the main landform list here.

Most freelance income is taxable, but certain exemptions may apply to certain self-employed individuals, namely these specific types of royalties:

  • Publication of artistic works, recording discs or tapes (exempt up to RM10,000)
  • Translation of books and literary works (exempt up to RM12,000)
  • Publication of literary works, original paintings or musical compositions (exempt up to RM20,000)
  • Research results that have been commercialized (50% exemption of statutory income derived therefrom)

Step 3: Make your payments

There are several ways to pay your taxes. Concretely, you can pay via:

  • ByrHASil on the ByrHASiL LHDNM portal via FPX or via Visa, Mastercard and American Express credit cards
  • Designated banks (full list here)
  • Pos Counters Malaysia
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Make sure you make your payments before the due date of April 30, 2022. Otherwise, you will be subject to a 10% increase in your tax.

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And There you go! Fairly easy, but definitely requires time and effort.

If you’re a freelancer or even a freelancer on the sidelines who haven’t thought about registering your work as a business, now is a great time to think about it. By registering your work as a business, you will be able to deduct business expenses and benefit from more tax incentives.

For example, if you are a content creator and you spend money on film equipment for videos, you can deduct those purchases as an expense of running the business.

Filing your taxes can be inconvenient, but it doesn’t have to be. Hopefully our quick guide can reassure you during this (literally) trying season.

  • Read more about what we wrote about taxes here.

Featured Image Credit: Pexels

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