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How to File Freelance Income Tax in Malaysia

Venus Low
by Venus Low
May 23, 2024 at 4:12 PM

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The freelance market in Malaysia has grown significantly in recent years, with many people using social media, Upwork, Fiverr, Maukerja, Ricebowl and more to earn income. Today there are many freelance job opportunities for fresh graduates in Malaysia. The Covid-19 pandemic has further boosted this growth as people looked for ways to deal with salary cuts and job losses. The government has supported the gig economy with incentives through various stimulus packages, like the PENJANA economic recovery plan and more. They've also established the Gig Workers Commission to ensure freelancers receive protections and benefits similar to formal workers under Malaysia labour law- Employment Act 1955. 

If you've been freelancing, either full-time or part-time, you might be wondering about filing your freelance income tax malaysia when tax season is here. Do you need to file taxes since when you are not officially employed by employers. What is the process? What type of tax form I need to use? Here is a quick guide to help you to file income tax for freelancer in Malaysia. 


What is Freelancing? 

Freelancing is doing specific work for clients without committing to full-time employment. Freelancers often handle multiple projects with different clients simultaneously. According to the World Bank, self-employed individuals are those whose income depends directly on the profits they earn, which accurately describes freelancers and gig workers. It includes gig economy workers, like e-hailing drivers, delivery riders, and sellers on Shopee, Lazada or other e-commerce platforms. 

There are lots of freelancing jobs in Maukerja and Ricebowl. Apply now today. 


Do freelancers Pay Tax in Malaysia?

Yes, everyone needs to file their taxes if they have a registered tax file or if their annual income exceeds RM34,000 after deducting their EPF contributions. This applies to all income sources. Whether you work for a company or freelance, if you meet the income threshold, you must file your taxes.


How to File Freelance Income Tax in Malaysia?

Freelancers need to take certain extra steps to file their income tax, as follows- EA form and PCB. 

EA Form

The EA form is a document provided by employers to their employees, summarizing details such as annual earnings, and EPF and SOCSO contributions for the year. This document is incredibly useful for filing taxes since all the necessary calculations are already done for you; you just need to enter the correct numbers in the right places on the income tax form. Freelancers need to take the extra step of calculating their own profits by reviewing their invoices and expenses. It is a good idea to maintain accurate bookkeeping as you conduct your business.

Potongan Cukai Bulanan (PCB)

Potongan Cukai Bulanan (PCB), also known as Monthly Tax Deduction (MTB) affects how taxes are filed differently for employees and freelancers. As an employee, your employer deducts a portion of your salary each month for taxes. PCB payments are monthly deductions that act as advance tax payments. Introduced in 1995, this program allows you to spread your tax payments over 12 months, so you don't have to pay a large sum at the end of the year. With MTD, you might only need to pay a small additional amount if your deductions weren't enough, or you could get a refund if you overpaid. You can refer to how to register employee PCB deduction

Freelancers are not part of the PCB program, so they must pay the full tax amount at the end of the year. This can be a significant sum, so it's important to set aside money throughout the year for your taxes.


Which form should I use as Freelancer in Malaysia?

If you haven't registered your freelance work as a business, you'll use the BE form, which is for individuals who don't own a business. If you have registered your work as a business, you should use the B form instead.


How to fill in the BE form as Part Time or Full Time freelancers

If you're using the BE form for your tax filing, part-time and full-time freelancers will declare their income slightly differently. Part-time freelancers need to list their day job income under "Statutory income from employment" and their freelance income under "Statutory income from interest, discounts, royalties, pensions, annuities, other periodical payments, and other gains and profits."


Full-time freelancers will report all their earnings under "Statutory income from interest, discounts, royalties, pensions, annuities, other periodical payments, and other gains and profits."


Tax Exemptions, Deductions, and Reliefs for Freelancers

As a freelancer, most of your earnings are taxable. However, there are exemptions available, such as:

  • Up to RM10,000 exemption for artistic works publication
  • Up to RM12,000 exemption for book translation
  • Up to RM20,000 exemption for literary works, paintings, or musical compositions publication
  • 50% exemption for commercialized research findings

Additionally, full-time freelancers can benefit from the Self-Employment Social Security Scheme (SESSS) and EPF Voluntary Contribution (i-Saraan) program. These contributions are similar to SOCSO and EPF contributions for self-employed individuals, helping to reduce taxable income. 

We hope this helps Malaysia freelancers understand how to file theirfreelance income tax malaysia. In some cases, it might be wise to hire a professional tax consultant, especially if you've earned a substantial income and the filing process is complex. They can also provide tips for future tax preparation.

For detailed step-by-step guidance on filling out your income tax form, you can also refer to MyTax portal.


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