How to File Your Income Tax When You're Freelancing

Doing your taxes as a freelancer is not that hard to do, especially with this handy guide we’ve prepared for you!

Before you ask, yes, you definitely do need to file your taxes even if you freelance. If you already have a tax file registered (from previous employment), do submit your return form even if your annual or monthly income falls below the chargeable level (RM34,000 after EPF deduction).

However, if you don’t already have a tax file registered and your income is below the chargeable level, you don’t have to register a tax file.

Are There Any Differences Between Filing Taxes As An Employee and As A Freelancer?

There isn’t too much that separates employees from freelancers. In fact, both might even use the same form depending on whether a business has been registered or not (more on this later on).

But there are a couple of differences, for one, employees receive a document called an EA form which details their total salary earnings as well as total EPF and SOCSO contributions for the year.

This required summary of income is quite helpful when filling in your return form. Fulltime freelancers will have to figure out their earnings by tabulating their profits through invoices and expenses.

Furthermore, employees may also be under the Monthly Tax Deduction (MTD) program where their company calculates and makes tax deductions for them, on a monthly basis. When it comes time to actually file taxes, an employee may only pay a small amount because of the MTD or even receive a refund if they’ve overpaid. Apart from this, full time freelancers and the employed will have to go through the same process to file taxes.

So As a Freelancer, Which Tax Form Should I Use?

If you have not registered your freelance work as a business, then you can use Form BE – for individuals not carrying on a business. However, if you have registered a business, you will need to file your taxes with Form B.

Do I Need to Pay Taxes On All My Earnings?

You do need to pay taxes for most but not all types of earnings; there are in fact certain exemptions. Here are a couple to take note of:

  • A maximum exemption of RM10,000 for royalties received for use of your copyrights and patents such as publications of artistic works; RM12, 000 for translation of books and literary work for certain purposes; and RM20, 000 for publications of literary works, paintings and musical compositions.
  • 50% exemption of statutory income derived from research findings that have been commercialized.

Find out about the other types of incomes that you may receive exemptions for here.

What If My Freelance Income is From Outside of Malaysia?

It’s not uncommon for freelancers to earn incomes from foreign companies (not based or registered in Malaysia). According to the Inland Revenue Board of Malaysia (IRBM), with effect from the year of assessment 2004, income received from outside Malaysia is exempted from tax.

What Can I Do to Make it Easier on Myself as a Freelancer When Tax Season Comes Around?

Contribute to Your EPF Account and Private Retirement Scheme

Since you don’t have an employer to make monthly tax deductions, the figure you pay will be in a lump sum, which can be rather hefty if your earnings are large. Take advantage of tax reliefs for retirement contributions; EPF (RM6,000 relief); and PRS (RM3,000 deduction), as well as medical insurances to pay less in tax.

Register Your Business

It’s tricky to get a loan as a freelancer but your chances are definitely improved when you have a viable, legitimate business to show. Moreover, you could enjoy better tax rates (for sole proprietors), claim for business expenses and deductions; and perhaps even demonstrate greater credibility to your clients.

Hire an Accountant

While this is not a must, you’d be wise to hire a professional to help you with your taxes at least for the first time. An accountant can help you legitimately claim for business expenses and deductions to pay less in tax. More importantly, they can teach you how to (legally) plan your taxes and file them the following year.

Pay a Visit to the IRBM

Undoubtedly, there are some grey areas when it comes to freelancing fulltime and since every freelancer has specific tax issues to deal with, it’s safest to go directly to the source. Make an appointment or write-in to the IRBM to clarify all your tax concerns with your regard to your line of business.

Working as a freelancer often equals unsteady paycheques and thus, to keep from being stressed with money woes, make sure you have a healthy reserve before you venture out and freelance fulltime. Start saving now with a high- interest savings account that lets you earn more, faster. Check out our list of the best savings accounts available on our comparison page!

0 comments

Agree or disagree with this post? Questions? You also have your word!

  • Carmen

    What if you own a self-operating business?

    Reply
  • becca

    let's say I want to file my taxes online, how do I do that?

    Reply
  • N

    Do you have a guide on how to file tax exemption when my income is from outside of Malaysia? I am a web programmer earning money from someone overseas.

    Reply
  • Mand

    As for freelancer, can we actually pay tax monthly (like MTD) instead of lumpsum as mentioned in your article?

    "Since you don’t have an employer to make monthly tax deductions, the figure you pay will be in a lump sum, which can be rather hefty if your earnings are large."

    Reply
    • RinggitPlus

      Hi, Mand.

      Based on what we understand, MTD requires an employer to consistently deduct from your salary. As such, it will be difficult to do MTD. However, we recommend contacting LHDN for more information.

      Thanks for the question and we hope this help.

      Reply
    • Lee

      If my income is 100% from overseas, does that mean I don't have to file a tax? If I need to file tax, what to write under nombor majikan? Thanks

      Reply
      • RinggitPlus

        Hi, Lee.

        Unfortunately, we do not have a clear answer for this matter. We advise you to contact LHDN for more information and clarity.

        Thanks for the question and we hope this help.

        Reply
      • K

        Can ringgitplus confirm this information that freelance income from outside of Malaysia is not taxable? the whole quote is :
        "However, with effect from the year of assessment 2004, income received in Malaysia from outside Malaysia is exempted from tax. Hence, an individual, either or non-resident, is taxable only on income accruing in or derived from Malaysia."

        Would it not be that since the income is accrued in Malaysia, considering the services rendered to the foregin company, is payable to an individual who is living in Malaysia, that it be taxable?

        Reply
        • RinggitPlus

          Hi, K.

          Unfortunately, we do not have an answer for this as we do not have a proper context. We advise you to contact LHDN for more information and clarity on this matter.

          Thanks for the question and we hope this help.

          Reply
        • K

          Can you guys get his part clear on foreign freelance income. As the activity (you freelance work) is performed in Malaysia, and you are a tax resident, this income is definitely taxable.

          Reply
          • mr. z

            Hello RinggitPlus, curious on tax filing for side specifically on room/property rental incomes, as well as on how loan interest or maintenance fees are factored into the equation. Do you have a guide on this?

            Reply
            • RinggitPlus

              Hi, Mr Z.

              Currently, we do not have a guide for this. But we might consider writing about this segment in the near future. In the meantime, we suggest contacting LHDN for more information.

              Thanks for the question and we hope this help.

              Reply
            • Koay

              Hi RinggitPlus,
              My husband is having a f&b business but at the same time he also working for others which is receiving the monthly income too. May I know he should declare the income under form B or BE?

              Reply
              • RinggitPlus

                Hi, Koay

                This depends whether the F&B business is registered as a business. If your business is registered, then you should file it on Form B even with the monthly income. We also encourage you to contact LHDN for more information and advice.

                Thanks for the question and we hope this help.

                Reply
              • Hafiz

                Hi RinggitPlus,

                I being retrenched last year in October. Company compensated 2 months to me and in the EA form, the amount of the compensation was fill under "Arahan Potongan CP38". Should I fill up this in EA, if yes, where to fill this? Is this the exemption tax?

                Reply