Now, for the million dollar question, do we (Malaysian Bloggers, ebay entrepreneurs) need to pay income tax? Unfortunately ‘yes’, we have to pay income tax.
Contrary to popular beliefs, income remitted from outside Malaysia is exempted from Malaysian Government Residential Tax. However, this rumor turned out to be not accurate. This has been countered by bloggers and online entrepreneurs based on Clause 12 under the ‘Tax Exemption For Individuals’ which stated clearly that:
12. Income Remitted from Outside Malaysia.
With effect from the year of assessment 2004, income derived from outside Malaysia and received in Malaysia by resident individual is exempted from tax.
I believe, the true meaning of the above paragraph has been misinterpreted, based on my own understanding, what the LHDN tried to articulate is a person is exempted from tax if the incomes remitted from outside Malaysia had been taxed by the foreign government.
Based on an accountant’s (Ice Lim) telephone conversation with an officer from LHDN, the officer clearly elaborate in details to what extend a source of income falls under the category ‘foreign income’ and are tax excempted:
- The specific service must be provided outside of the country (Malaysia).
- You have to be a PR holder of a specific country and contribute to the specific country’s income tax. In other words, one must have a studio or resides in a foreign country.
Having gone through the article, I am still unsatisfied with the answer and took the trouble to write an email to LHDN for a more solid information, and the officer replied:
If you are a resident in Malaysia and only your server is based in the USA, then your income is subject to Malaysian Income Tax.
Let us hope that with all the information provided by the people from the LHDN and an accountant (ice lim), this would put an end to the rumor on bloggers are exempted from paying income tax. Simply put it this way, a person has to pay tax where he or she resides, this is because the person is making full use of the public facilities such as roads, proper waste management, police protection, general hospitals and many more.
The image above is the rates for resident individuals, for instant, if you earn RM5000 per month, your monthly taxable income is RM25.
Please be warned that it is not worth taking the risk by avoiding paying income tax. Tax evasion is a serious crime in Malaysia and in almost every country tax evasion falls under criminal law; the penalty depends on the amount of tax evaded by you and a harsh jail sentence. Do read this article – Businessman gets six months jail for tax evasion.
Should you require further assistance or still doubt about paying tax to our beloved corrupt Malaysian government, kindly contact them at 03-42893535, 03-42893600 or customer service centre 1-300-88-3010.
Next / Part 2: Must full time Malaysian blogger pay income tax in Malaysia?
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{ 4 comments… read them below or add one }
Good info although I am a Singaporean.
As long as the income is “banked” into your country’s bank account, it doesn’t matter where your ad sponsors are, or where your blog is served (even if web-server is ‘hosted’ overseas), income from websites and blogs must be accounted for income tax.
Hi Danny, I am Anjar from Indonesia :), i didn’t know and even never think about this tax matter. I think its quite complicated then, thanks for the information. Maybe one day i will learn about this since my online income is not so significant right now
hi i m sammie,i hope to get some advice from you where currently i m having problem with my company income tax(is a Enterprise).My problem is where i have bought tis company for pass 3 years,but i haven’t make any declar for income tax,and the problem is the income tax officer is taking up this matter n last week they even walkingin to my company,but they never collect any of my company account or handbook yet,so here i request and wana here your suggestion on how to handle this matter as my company incometax statute already in this matter…please advice.thanks
If you earned RM 5,000 per month, your income tax is not RM 25.
RM 5k a month translates to RM 60k annually, which is liable to:
First 50,000 – RM 3,475
Next 10,000 – 1,900
Total liable tax: RM 5,375.
That is if your RM 5k is after deducting every deductions available.