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 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. Full-time 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) programme where their company calculates and makes tax deductions for them, on a monthly basis. When it comes the 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 commercialised.

Find out about the other types of income 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 income from foreign companies (not based or registered in Malaysia). Well, here’s some good news, because as of YA 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 private retirement schemes (RM3,000 relief), as well as life and medical insurances to pay less in tax. Find out what other tax reliefs you may be eligible for.

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 A Tax Consultant

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. This would be a big help especially if your freelance income is significant or the numbers are looking particularly complicated. They 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 LHDN

Undoubtedly, there are some grey areas when it comes to freelancing full-time 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 LHDN to clarify all your tax concerns with your regard to your line of business.

Armed with this information, don’t let freelancing deter you from properly declaring your income taxes (well, mostly because you’re legally obligated to file your taxes correctly). If you need a step-by-step guide to filling up your income tax return form, make sure to check out our income tax guide

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
              • Anson

                Hi RinggitPlus,

                I am a freelancer, I do visit customers place often for meeting. Is my petrol, tolls, stationary & entertainment fee (dinner with the customer) exemption of tax?

                Reply
                • RinggitPlus

                  Hi, Anson

                  This exemption for the tolls, petrol normally applies to individuals who work for a company. So, it is not entirely applicable for freelancers. That said, you could contact LHDN for better clarification as they will decide it on a case by case basis.

                  Thanks for the question and we hope this helps.

                  Reply
                • Francis

                  hi mate, im doing freelance as a sales for 2 shipping companies, i decided to open a company so that the 2 companies im doing freelance can pay my profit to that company and same time i can use that company to do other business...question is ..i guess i need fill up form B, secondly as freelance i wont have a cost but just profit as the 2 companies just bank in the profit....how to declare the tax? any sample or calculator for form B ??

                  Reply
                  • RinggitPlus

                    Hi, Francis

                    Yes, you will need to use the Form B since you have a registered company. You can also head to LHDN's website for their calculator.

                    Thanks for the question and we hope this helps.

                    Reply
                  • Julien Chen

                    If i am a sole proprietor that provides freelance service and earn only 3k per month, do I still need to register with LHDN and pay income tax?

                    Reply
                    • RinggitPlus

                      Hi, Julien

                      It is important to note that it is the duty of every working adult to file and register themselves with LHDN regardless of income level. However, whether you are taxable depends on LHDN and the income that you earn. So, it is in your best interest to contact LHDN for more advice.

                      Thanks for the question and we hope this helps.

                      Reply
                    • Kang

                      Will LDHN give me a notice for when I'll have to start paying taxes ? I use to work corporate for 6 months and make 2k/ month hence I was not taxable ( I was issued pay slips then ).

                      I quit and went freelance for the past 12 months and I make about 5k/month. I did not file any taxes since I wasn't given a notice / letter. Only til I wanted to get a loan that the bank told me to get a tax invoice .. or statement I can't recall.

                      Anyways after doing some research I'm actually quite scared that I'm unintentionally avoiding taxes.

                      So any advice?

                      Reply
                      • RinggitPlus

                        Hi, Kang.

                        Understandable. Here is what you need to do: Contact LHDN and explain your situation to them. This step is not meant as a way to avoid penalty from LHDN but it is a necessity for documentation. Next thing you need to do is to gather documents like invoices and receipts for proof of your income.

                        Thanks for the question and we hope this helps.

                        Reply
                      • Lee

                        Will LDHN send a letter / notice when you're taxable ?

                        I worked corporate for 6 months previously making about 2k/month ( I was issued a payslip / KWSP account )

                        After that I went freelance and I make about 5k/month.

                        I realized I need a tax invoice when I wanted to get a bank loan hence I did more research

                        Now I'm worried I'm avoiding taxes unitnentionally.

                        So what should I do

                        Reply
                        • RinggitPlus

                          Hi, Lee

                          Understandable. Here is what you need to do: Contact LHDN and explain your situation to them. This step is not meant as a way to avoid penalty from LHDN but it is a necessity for documentation. Next thing you need to do is to gather documents like invoices and receipts for proof of your income.

                          Thanks for the question and we hope this helps.

                          Reply
                        • Teo

                          Hi I'm a freelancer started early of last year. I do not have invoices for each services. Can bank statement working as a record?

                          Reply
                          • RinggitPlus

                            Hi, Teo

                            You still need an invoice for documentation regardless of the situation.

                            Thanks for the question and we hope this helps.

                            Reply
                          • Peter

                            Hi. I am planning to register a sole proprietorship company to work as a consultant. My income is 100% from oversea, which every month i will issue an Invoice for my client, which a lum-sum of let say RM 10k. But, the 10k is including like the office rental, car lease, air-ticket purchase, hotel accommodation and etc (i have to travel around Asia country) which agreed to pay by my client. In this case, let say my actual profit is RM5k, at the end when submitting FORM B, should i declare my CHARGEABLE INCOME as 5k x 12month=60k?

                            Reply
                            • RinggitPlus

                              Hi, Peter.

                              Well, you need to be sure about the expenses that you intend to file must be relevant in generating income. This means you need to prove these expenses are needed to generate your income to LHDN. Once you are sure, then you can get your chargeable income.

                              Thanks for the question and we hope this helps.

                              Reply
                            • Indran

                              Im employed and have PCB deduction but earn part time how do i need to file a tax for the part time income?

                              Reply
                              • RinggitPlus

                                Hi, Indran

                                This depends on whether your side work is a registered business. If yes, then you need to declare your current income and side income together on Form B. If no, then you need to declare it on Form BE.

                                Thanks for the question and we hope this helps.

                                Reply
                              • Olita

                                Hi, i have been freelancing for last year and i just registered a company early this year. My questions are:

                                1. Which form do i need to use if i were to file my tax this year?
                                2. What is the fastest way/ workaround that i can use if i want to let's say apply a credit card now?

                                Reply
                                • RinggitPlus

                                  Hi, Olita

                                  As this year of assessment is 2018, you could use the BE form. However, you will need to use the B form starting next year since you registered your business this year. As the other question, it really depends on the banks. So, you might want to check with the banks.

                                  Thanks for the question and we hope this helps.

                                  Reply
                                • ping

                                  I do have personal tax account, now I am having my own business as sole proprietor, How do I go about on the registration?

                                  Reply
                                  • RinggitPlus

                                    Hi, ping.

                                    You will need to use the B form to file your tax since you are now the owner of a business. You should also inform LHDN about your new status.

                                    Thanks for the question and we hope this helps.

                                    Reply
                                  • Kong

                                    Hi, i was an employee from Jan until Feb and thereafter became freelance after i resigned in Mar. I am declaring my tax from Jan to Dec. Do i need to change the Nombor Majikan? If yes, how do i do that?

                                    Reply
                                    • RinggitPlus

                                      Hi, Kong

                                      It depends on whether your side business is registered. If your business is registered, then you need to change the Majikan number.

                                      Thanks for the question and we hope this helps.

                                      Reply
                                    • Yi

                                      My husband has a registered business but has never declared his income. He has also never keep any copies of invoices and business sale statements. Since the value is relatively low, this is why he has never done so. Now we want to get a housing loan but not sure if it will be approved if loan is under both of us.. but if on my own, I think it might get approved but property is bumi unit so still need his name on it.

                                      Reply
                                      • Clueless

                                        Hi there, I began working as a contract worker some time in August after quitting my full time job. I am usually a cheque every month where I then bank into my account. My questions are:

                                        1. Since I am not issued an EA form, does this mean I should request for an invoice for all the cheques?

                                        2. I am intending to file my taxes. However, I also would like to know what is the taxable amount? I am earning RM3,500. And had taken on a RM10,000 one time project.

                                        I look forward to your reply.

                                        Reply
                                      • Mohd Fadly Senin

                                        How about Insurance Agent Tax declaration??

                                        Reply