I’m sure we’ve all heard the saying one too many times now, but here it is again – nothing is certain but death and taxes.
Yet, as certain as it is, there is still always that level of uncertainty that comes every tax season. Probably even more so for self-employed individuals. Hence, we’re 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’re required to file your taxes. If you haven’t hit that income threshold but already have a registered tax file before, you also need to file your taxes.
Note that the source of your income doesn’t matter—whether it’s from gig work or freelancing or even rent, royalties, dividends, and more, it still counts as a taxable income.
Step 1: Keep track of your income
The typical employee doesn’t have to keep track of their earnings because employers prepare the EA form for them, which is a yearly remuneration statement. It summarises the employee’s annual earnings as well as EPF and SOCSO contributions for the year.
However, for those who are self-employed, freelancers, or gig workers, you’ll need to tabulate your own profits. It’s a good idea to stay organised and on top of your bookkeeping throughout the year for this.
Furthermore, while full-time employees go through the Monthly Tax Deduction (MTD) programme where employers make the monthly tax deductions for them, the self-employed aren’t afforded that convenience.
Instead, you’ll have to pay your taxes to Lembaga Hasil Dalam Negeri (LHDN) Malaysia in one go. This lump-sum tax payment might be quite sizable if your earnings are large, so be sure to set aside some money for that.
Step 2: Fill in your forms
Instead of the EA form, self-employed individuals will have to fill in the BE form. If you’re a freelancer who has registered your work as a business, however, you’ll fill in the B form.
It can be quite intimidating when first approaching the forms, but it’s more time-consuming than it is difficult.
Note that part-time freelancers or gig workers (AKA those who are still employed but picking up freelancing gigs on the side) have a different process compared to full-time freelancers.
Part-timers have to fill in the income you earn from your day job under “Statutory income from employment”, and the income from your freelance work under “Statutory income from interest, discounts, royalties, pensions, annuities, other periodical payments, and other gains and profits.”
Individuals who are fully self-employed will just enter all their earnings under “Statutory income from interest, discounts, royalties, pensions, annuities, other periodical payments, and other gains and profits.”
Step 2.5: Check reliefs and exemptions
Reliefs, deductions, and exemptions are our friends. Freelancers essentially get the same reliefs for normal employees. You can check out the master list of reliefs here.
Most earnings for freelancers are taxable, but there are some exemptions that might be applicable to certain self-employed individuals, namely these specific types of royalties:
- Publication of artistic works, recording discs, or tapes (exemption of up to RM10,000)
- Translation of books and literary works (exemption of up to RM12,000)
- Publication of literary works, original paintings, or musical compositions (exemption of up to RM20,000)
- Research findings that have been commercialised (50% exemption of the statutory income derived from these)
Step 3: Make your payments
There are a few ways to make your tax payments. Specifically, you can pay through:
- ByrHASil at the ByrHASiL LHDNM Portal via FPX or via Visa, Mastercard and American Express credit cards
- Appointed banks (full list here)
- Pos Malaysia counters
Be sure to make your payments before the due date of 30 April 2022. Otherwise, a 10% increase on your tax would be imposed.
And there you have it! Pretty easy, but definitely requires some time and effort.
If you’re a self-employed individual or even a freelancer on the side who hasn’t thought about registering your work as a business, now’s a great time to think about it. By registering your work as a business, you’ll be able to deduct business expenses and receive more tax incentives.
For example, if you’re a content creator who spends money on film equipment for videos, you can claim those purchases as business operating costs.
Filing your taxes can be troublesome, but it doesn’t have to be. Hopefully, our quick guide can ease your mind during this taxing (literally) season.
- Read more about what we’ve written on taxes here.
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