Filing Income Tax 101: Guide for Gig Workers in Malaysia | Homage

Filing Income Tax 101: Guide for Gig Workers in Malaysia

Do gig workers need to file tax? This guide helps you understand if you are taxable, the steps to file taxes, and how to maximize tax relief for gig workers in Malaysia.

by Calvyn Ee

Who Qualifies as “Gig Workers”?

Delivery man as a gig worker | Homage

In our previous article, we touched on what gig workers are. Essentially, gig workers are self-employed freelancers who work on their own time fulfilling temporary or part-time positions. According to World Bank estimates, 25 per cent of the Malaysian workforce is self-employed, many of whom would be part of the gig economy. With how rapidly the gig economy’s landscape is changing, it’s predicted that the total number of gig workers in Malaysia is bound to increase over time.

The gig economy primarily revolves around the digital economy, which includes e-hailing drivers, p-hailing riders, e-commerce sellers, online educators, and even social media influencers. You’re considered a gig worker if you work on your own flexible schedule, take on gigs whenever and wherever there is one available, and your income “depends directly on the profits derived” from your gigs.

Keen to know more about gig workers in Malaysia? Read the full article on gig economy here!

Gig Workers and Income Tax Filing

There’s a lot of confusion surrounding the nature of gig work and taxation. A lot of people have the misconception that by being part of the gig economy, you won’t need to file your taxes at all. In fact, if you already have a registered tax file, or if your annual income is more than RM34,000 after deducting EPF contributions, you’ll need to file your taxes. So long as you reach that maximum threshold that can be taxed, you’ll have to get it done.

There are some notable differences between how a freelancer and full-time employee file their taxes.

Tax Filing as Gig Workers vs. Full-time Employees

Keeping tabs on tax deduction as a gig worker | Homage

For full-time employees, a part of the taxation process is handled by your employer – a convenience that freelancers don’t have since they’re on their own. One notable example is the EA form. This form is completed by employers and then given to their employees; it’s a complete summary of the employee’s annual income, as well as EPF and SOCSO contributions for that particular year. With the form, employees just need to key in the figures on the form into the tax filing system.

Freelancers will unfortunately have to figure this out for themselves. That means having to keep tabs on your overall expenses, store receipts in a secure place, and so forth. Being a freelancer means needing to be meticulous with your bookkeeping. Moreover, if you’re not already registered as a sole proprietor, you might lose out on the chance to claim certain tax incentives – more on this later.

There’s also the issue of Monthly Tax Deductions (MTD; PCB in Malay), which employees also benefit from their employers’ handling throughout their employment. As the name suggests, the MTD essentially deducts a monthly amount to help with paying your taxes at the end of the year. Thanks to the MTD, you only need to pay a small amount of your MTD amount can’t cover the entire tax amount payable; if you’ve overpaid, you’ll get a refund instead.

Again, freelancers don’t have help with setting aside a sum for the MTD. As such, you’ll need to set aside some funds for the express purpose of substituting the MTD. Otherwise, you might have to pay a hefty sum if your earnings are high!

Filing Your Income Tax as a Gig Worker 

Not sure how to go about filing your taxes? Here’s a step-by-step guide to help you out.

Step 1: Register as a Taxpayer

If you haven’t already done this, you can register via the MyTax online portal from the convenience of your own home. Make sure that you have a digital copy of your identification card ready before you start. If you prefer to go to the nearest LHDN branch in your area, bring along a copy of your IC and your latest salary slip or EA form.

If you’re registering online, head to the e-Daftar page and choose your taxpayer type in the dropdown box. If you’re an individual, then select individual; otherwise, pick any of the options that are relevant to your business (sole proprietorship, etc.). Key in the other required details and the security code, then hit the blue Search button below.

Edaftar E-filing

If you get a message saying that “no tax income record” for your IC was found, click on the e-Daftar link just below that message. You’ll then be taken to a long form that needs to be filled up with your personal details as well as that of your employer (or the nature of your business, whichever is applicable). You may also need to upload the necessary documents. Make sure you key in the correct information or you’re liable to be fined!

Further information can be found in the e-Daftar manual.

Step 2: Complete the Registration Process via MyTax

Next, head over to the MyTax portal or use the dedicated MyTax mobile app if you’re on your phone. The MyTax portal is basically a one-stop centre to access all of LHDN’s online services, including the tax filing system. You can also review all your previous tax filings and other relevant information.

MyTax E-filing

Log in to your account with your IC number (or other ID types) and you should be prompted with a “Digital certificate does not exist” message. To proceed with this, you can either go through an eKYC process via your mobile device (it will require facial identification, according to the documentation) or submit an e-CP55D form via the MyTax portal.

If you picked the e-CP55D method, you’ll need to provide your registered e-mail address and confirm it. An activation link (only valid for two days) will be sent to your email address; just click on the link provided and you’ll be taken back to the MyTax portal. Log in to your account and you’ll be taken to another page where a PIN is displayed; that’s the PIN assigned to you. Key in your identification number and proceed to the next page.

In here, you’ll need to verify that your information is correct before you key in your desired password for accessing the MyTax portal. You’ll also need to set a security phrase so you know you’re logging in to the correct account. Agree to the terms and conditions by pushing the corresponding radio button and clicking on Submit. Congratulations! You may now proceed to complete your tax filing via MyTax!

Step 3: File your Taxes

You can perform the tax filing in person at the nearest LHDN facility or through their online e-filing system. If you’ve already completed the online registration process, you may as well file your taxes online, as filling up the forms can be a rather tedious process.

BE-form e-filing

If you’re not registered as a business, you’ll need to file your taxes using the BE form – but where you key in your income depends on your freelancing work. Part-time freelancers who still hold a day job will need to key in their income from their day job in the “Statutory income from employment” section, while your gig work income goes under the “Statutory income from interest, discounts, royalties, pensions, annuities, other periodical payments, and other gains and profits” section.

Full-time freelancers only need to key in their income under the “Statutory income from interest, discounts, royalties, pensions, annuities, other periodical payments, and other gains and profits” section.

If you’re receiving income from foreign companies, do note that the income earned from said foreign companies – that is, not based or registered in Malaysia – isn’t subject to Malaysian income tax. Basically, your earnings will be exempted from tax filing. You’ll still need to keep your invoices and other documents securely, though; otherwise, your earnings could be considered Malaysian-derived income.

Once you’ve completed the process, be sure to keep all relevant documents in a safe, secure place for future reference. This is necessary if LHDN need to clarify certain things with you. In fact, you’ll need to store these documents for a period of seven years, so don’t lose them!

And make sure you complete your tax filing before the deadline. Part-time freelancers have until 30th April 2023 to submit their BE forms; however, there’s a 15-day grace period that will be given, so the latest you need to submit is on 15th May 2023. For full-time freelancers, you need to submit form B by 30th June 2023; taking the grace period into account, the latest submission date would be 15th July 2023.

Maximising Tax Reliefs

Maximising Tax Reliefs | Homage

Before you finish up, you should know about various tax relief incentives that might be applicable to you. You can find a master list of all reliefs you can make use of at the LHDN website.

Some exemptions that might be applicable to you include:

  • Exemption of up to RM10,000 for publishing “artistic works, recording discs, or tapes”
  • Exemption of up to RM12,000 for the “translation of books and literary works”
  • Exemption of up to RM20,000 for publishing “literary works, original paintings, or musical compositions”
  • 50% exemption of “statutory income derived from research findings that have been commercialised”

For full-time freelancers, you could consider taking advantage of the Self-Employment Social Security Scheme (SESSS) and the EPF Voluntary Contribution (i-Saraan), which are similar to Social Security Organisation (SOCSO) and Employees Provident Fund (EPF) contributions an employer provides for their employees.

Are you a family caregiver looking to maximise income tax relief for the year 2023? Find out these 9 types of tax relief that you can claim in this article.

Gig Opportunities with Homage

Homage Care Pros

Here at Homage, we offer attractive gig work opportunities for those of you interested in flexible and meaningful caregiving. We provide training and educational resources via Homage Academy to help kickstart your career with us. With these skills, you have a chance to earn as much as RM2,000 to RM3,000 in just two weeks. You can earn more by taking on care duties on public holidays (an additional RM5 per hour) or as night shifts (an additional RM2 per hour).

On top of that, we’ve also got you insured anytime you head out for any care assignments, so your coverage automatically starts when you go on a visit. 

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About the Writer
Calvyn Ee
Calvyn is an aspiring author, poet and storyteller. He spends his time reading, gaming and building stories with his action figure photography.
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