Gig Worker's Guide To Filing Your Taxes in Malaysia

It’s tax filing season again! Yes, we know it’s such a chore but you need to do your part as a taxpayer and if you haven’t submitted yours yet you probably should. You can read up on the due date for your specific taxpayer category here. If you’re a gig worker who has the mindset that you don’t have to declare your taxes because you’re not a full-time employee, think again.

So, why should gig workers declare their income and file taxes like every other full-time employee besides the simple reason of being a responsible Malaysian citizen? To set the record straight, we spoke to Thenesh Kannaa, a partner at TraTax, a firm of chartered accountants who specialise in tax advisory and an Association of Chartered Certified Accountants (ACCA) Expertlink panel member for Taxation. The panel brings together a select group of industry experts to advise ACCA on its thinking on current and future trends affecting the profession and business.

The pand​​emic truly changed the way that we work with many more workers making the shift to remote working and taking on extra jobs to earn additional income. While the concept is not new to us Malaysians, the catchy name and influx of informal work arrangements during and after the disruptions of the pandemic have put it firmly on the map.

What is a gig worker?

A gig worker is defined as “a person who does temporary or freelance work, especially an independent contractor engaged on an informal or on-demand basis”.

As of 2020, around 4 million Malaysians or approximately 26% of the workforce are engaged in what’s known as the gig economy, a labour market that relies heavily on such workers. Contrary to popular belief, this doesn’t just include graduates providing professional services like freelance writing, graphic design and IT support to clients based in other countries. This also includes the mak cik who sells nasi lemak and your neighbour who offers home tuition or cleaning services to make ends meet.

Three Facts You Should Know About Paying Taxes as a Gig Worker

1. You can easily get your Tax Identification Number online

The process of applying for a tax file number, also known as Tax Identification Number (TIN) is simple and can be done online on MyHasil within just a few minutes . You can also do it from your mobile phone. There is no longer any need to head to the Inland Revenue Board Of Malaysia (LHDN) office with a physical application form, but you still have that option if you prefer to.

2. All income (full-time or otherwise) is taxable and must be declared

For most people who hold permanent jobs, their employers provide them with an EA form every year that contains information such as the total amount of income earned from the said employer as well as their Employees Provident Fund (EPF/KWSP) and Social Security Organisation (SOCSO/PERKESO) deductions.

However, if you have any other sources of income, even those that are seen as informal, these must be declared too. So this applies to you if you are self-employed or if you call yourself a gig or freelance worker:

• rentals from any property you own

• gig income earned from occasional or recurring jobs

• side income from food delivery gigs, emceeing at events, driving an e-hailing vehicle, operating a home-based bakery

• those who are self-employed

• any other similar forms of work

In summary, you could have a full-time job, for which you are already paying taxes, and also be a gig worker in your own time. Otherwise, you could be doing gig work as your only source of employment or income. In both cases, you need to declare all your income.

3. Not everyone will actually need to pay taxes

Hold your horses if you are feeling despair if you’re already struggling to make ends meet. In both the scenarios above, you have a responsibility to declare all your income but, depending on how much you earn, you may not need to pay any taxes at all. This is because those earning less than RM3,400 per month on average will not have to pay any income tax, although you are still required to file a tax return to satisfy the compliance requirements.

How To Have A Smoother Tax-Filing Process As a Gig Worker

If the process of filing taxes seems overwhelming, here are some tips to keep in mind to facilitate the process.

1. Work out your income

Know how much of your income is actually taxable. Having a spreadsheet or other software clearly identifying how much you are making and how much income to declare will help.

2. Be diligent in keeping records of your expenses

Record-keeping of business expenses (vs private or domestic expenses) is very important. Don’t forget to keep track of all your spending as part of your gig work too.

3. Understand and utilise your capital allowances for your tax declaration

Your capital allowance is similar to a tax-deductible expense on qualifying assets in the production of your income. Certain items that are purchased for the purpose of providing your service, be it a new oven for a home-baking business to a motorcycle for the purpose of making deliveries, may be applicable for tax depreciation or capital allowances claims. This means you end up paying less taxes, (if you are required to pay any at all).

4. Include all of your personal tax relief deductions

This is given to every taxpayer in Malaysia for personal expenses. So for these expenses, there does not have to be incurred in relation to your gig income. Every year, there is a complete list of various exemptions ranging from dependents and medical costs to education and lifestyle so be sure to look them up on the LHDN website. Compiling the necessary receipts for this will help reduce your tax load as well. Make sure to keep the receipts for at least seven years to support your tax return entries.

Getting Help & The Consequences of Not Filing Your Taxes

Thenesh recommends professional help from a tax agent licensed by the Ministry of Finance or you can also visit the nearest LHDN branches, equipped with all your receipts and other records of your income and business-related expenses, so they can assist you accordingly.

Needless to say, there are consequences to failing to declare your taxes, which range from hefty fines if you are audited as you will be required to pay all your backdated taxes in addition to a penalty. On top of that, poor tax records can lead to difficulties in future financial situations such as applying for bank loans, explained Thenesh. Imagine dreaming of buying a house but hitting a wall because you failed to file your taxes

Ultimately, what you should know is this –– as a gig worker, you do need to declare your income, no matter how much (or how little) you earn. The deadline for manual filing is on 30 April and e-filing is 15 May but if your gig income qualifies as a ‘business income’, you have until 30 June (manual filing) or 15 July (e-filing). So don’t forget to file your taxes soon, guys!

Our thanks again to Thenesh from TraTax for sending us these useful tips and to ACCA for the hook up!

Image credit: facebook.com/LHDNM