Do you need to declare your side income in M’sia when filing taxes? Here’s what the law says.

Disclaimer: This article is for general informational purposes only and is not meant to be used or construed as legal advice in any manner whatsoever. All articles have been scrutinised by a practising lawyer from Tristan & Partners to ensure accuracy.

So, you’re a hustler and run a side business. Maybe you’re freelancing after work, running an online business, or cashing in as an online influencer. That’s plenty respectful. 

But with that extra dough rolling in, here’s the million-ringgit question: Do you need to report it to LHDN? And at what point do you need to start doing it?  

Some Malaysians might assume that side hustle money is “off the books” or too small to report. Unfortunately, as the saying goes, the two things in life you can’t avoid are death and taxes. 

Yep, even if you’re just making a quick buck after work, any additional income is technically taxable under Malaysia’s Income Tax Act 1967.

Feeling spooked? Let’s break it down.

You’ve got to report it

According to the LHDN, gains or profits from carrying on a business, trade, vocation, or profession are liable to tax.

The term “business” includes sole proprietorship or self-employment, as well as partnerships. 

It’s also inclusive of “shadow economy” businesses. 

The shadow economy is sometimes called the underground economy, a non-compliant economy, hidden economy, grey economy, black economy, cash-based economy, or informal economy. 

This could involve industries such as the tutoring industry, certain road-side stalls, or home-based businesses. 

Even if your income doesn’t meet the threshold to be taxed, you still need to report it.  

By the way, if you have a side business, you should register it with the Suruhanjaya Syarikat Malaysia (SSM)—more on that here. 

And if you’re wondering whether influencers need to report their earnings, the answer is yes. 

According to a document on hasil.gov.my, “Taxation on business income is imposed on businesses or professions that receive money into individual bank accounts including YouTubers, Instafamous, influencers or those who do paid reviews and others.” 

If you don’t comply…

Just to reiterate, individuals must declare their total income, including side hustle earnings, in the annual tax return (Form BE for residents without business income or Form B for residents with business income). 

But the devil on your shoulder might be wondering: What if I just… don’t?

Well, failure to report such income can result in penalties, including fines and additional tax assessments.

And perhaps as consolation, while all income must be reported, taxpayers are entitled to claim allowable deductions and reliefs to reduce their taxable income. These may include expenses directly incurred in generating the side hustle income, such as business expenses. 

We get it—reporting your side hustle income isn’t exactly fun. It can be super tedious and unexciting. But neither is getting hit with a massive fine. 

If you’re self-employed and are feeling overwhelmed at the prospect of getting started, here’s a guide that might be handy.  

Now, go forth and get your hustle on—legally. 

Featured Image Credit: Vulcan Post