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Malaysian freelancers’ guide to becoming a sole proprietor

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Registering as such offers many incentives and rebates that can reduce your tax burdens and save you more money.

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Free Malaysia Today
Digital marketers and online sellers are among those who should consider registering as a sole proprietor to gain tax benefits.

PETALING JAYA:
Thanks to the pandemic, the number of freelancers in the workforce has markedly grown. Working for oneself offers privileges once only afforded to bosses: the freedom to earn more, flexible hours, and the control over one’s future.

E-hailing and delivery drivers, online sellers, roadside food vendors, digital marketers, YouTubers, even crypto traders fit the bill.

The World Bank estimates that over 25% of the Malaysian workforce is self-employed. And, with the Inland Revenue Board (LHDN) expecting its cut, there are ways to gain some juicy tax rebates to reduce one’s burden.

Here are a few key things that every freelancer should know about paying their fair share while still saving money.

For most self-employed, gig workers, and freelancers, registering as a sole proprietor business with the Companies Commission of Malaysia (SSM) is a good idea and can be done relatively easily.

The online registration only takes a few minutes and requires uploading a copy of the individual’s NRIC, selfie with said NRIC, and a supporting government document such as a passport or OKU card (with the latter, you can also register and claim benefits from existing OKU schemes).

Once submitted, an approval email follows with a reminder to book a virtual appointment with an SSM officer to verify your identity and documents within 72 hours. Digital nomads outside of Malaysia are not excluded as it can be conveniently done over a Whatsapp video call.

After completing the verification process, registering as a sole proprietor or accessing any of SSM’s services, including future renewals, can be done online via the SSM portal.

Free Malaysia Today
Online registration with the SSM can be done relatively quickly and easily. (File pic)

The cost of registering as a sole proprietor is RM30. If a trademark is needed, it costs nominally more at RM60.

Advantages of being a sole proprietor

The biggest benefit to registering is the ability to claim business expenses and deductions to reduce your net income, which in turn, reduces the amount of taxes owed (if any).

Taxable or net incomes of under RM34,000 are currently not subject to income tax. Other tax reliefs, as of press time, include:

  • automatic individual relief of RM9,000;
  • education fees in Malaysia up to RM7,000;
  • complete medical checkup up to RM1,000;
  • reading materials, electronics, sports equipment, and internet subscription up to RM2,500;
  • personal computer, smartphone, or tablet up to RM2,500;
  • tourist accommodation or attractions up to RM1,000;
  • life insurance and EPF up to RM7,000;
  • disabled/OKU automatic relief of RM6,000;
  • income from royalties for any literary work, musical compositions, or original paintings up to RM20,000.

Being a registered sole proprietor can also offer easier access to financing from institutions, and even improve a freelancer’s reputation and brand in their industry.

Do note that changes for the next fiscal tax year can still occur between today and when taxes are due, so it’s always advisable to consult a tax specialist or visit LDHN for more guidance.

Visit the SSM portal for more information or to register. For further info on tax reliefs, click here. Also check out LHDN’s guide for digital businesses and e-commerce taxation.

Reg Ching is a walking quadriplegic (OKU), digital nomad, business consultant, medical cannabis advocate, and cryptocurrency enthusiast. Follow his journey at regching.com.

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