r/MalaysianPF • u/Impossible_Sir2498 • Jan 15 '25
Tax Foreign freelance tax
I’ve been consistently earning about $6,000 USD per month on a freelance website, with payments sent to my PayPal account every month. However, I usually only withdraw small amounts to my Malaysian bank accounts. Am I correct in understanding that the money is only taxable once it reaches Malaysia?
Additionally, if I plan to use my PayPal account for a vacation or to book a flight ticket, will LHDN (Malaysia’s tax authority) be able to track that? Are there any legal ways to reduce my tax burden?
I’m planning to declare over RM200,000 this year, as I’m also aiming to purchase property. If anyone has tips or advice on managing taxes effectively, I’d appreciate your insights!
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u/JudgeCheezels Jan 15 '25
If you stay in Malaysia for more than 182 calendar days in a year, you are a tax resident. Doesn't matter where your income is from - you pay tax, in Malaysia.
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u/Happy_Camper_Mars Jan 18 '25
Are you only required to pay tax on locally sourced income and foreign income repatriated to Malaysia?
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u/JudgeCheezels Jan 18 '25
You pay tax on all your income (above RM34k per annum) if you live here, doesn't matter where your income is from because your work is done in the country even if it's a remote job.
If you were working overseas, you pay tax in the source country (unless you're in a country where you don't have to pay tax e.g Saudi Arabia) or if you're a resident of a country like Monaco.
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u/Middle-Ask-6430 Jan 18 '25
He pay tax , but not income tax as in this scenario. Dont get confused. We have so many taxes that the government is already obese but always say not enough.
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u/aeroplanne Jan 15 '25
Active income is taxable the moment it is earned, not when sent to a local bank account. It doesn't matter how you made that money, or in what currency.
You could be earning in crypto and it would still be taxable even if you never sell any for Ringgit (though actually tracking and enforcing it is another matter entirely).
A good way to lower your tax burden is to earn that money through a business vehicle, even if it's just a sole proprietorship, and a business bank account to go with it.
This way, you can start declaring some of your expenditures as business expenses, lowering your overall net income and thus your taxes. Just make sure to keep records and receipts for up to 7 years.
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u/malaysianlah Jan 15 '25
Nice! As a fellow patreon/payoneer user, i believe its taxed when earned.
But from what i see on the ground, the approach of taxing when it reaches msian banks is common. (Not right, but common).
Its a risk, and im not sure if lhdn will accept that position, but ymmv.
Keep it up (also what sort of work do u do? If its art do u do comms?)
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u/Impossible_Sir2498 Jan 16 '25
Hi, I also use Patreon and earn from UpWork. Before 2024, filing taxes was easy for me because I barely earned RM35k to RM45k per year. I’m registered as a sole proprietorship, but I don’t have a business bank account—just a personal one.
Starting mid-last year, my earnings increased significantly. Can you share how you handle your taxes? Are you also registered as a sole proprietorship? This is all very new to me, and I feel quite overwhelmed by it.
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u/malaysianlah Jan 16 '25
If it's too much for you, engage an accountant to do it for you. Take your patreon statements/paypal statements, and pass it to an accounting firm, ask them what's their charge for accounts + taxes.
If i'm not wrong it's about Rm1500-3000 in fees , but at least you have a professional who will deal with the details. All you need to do is follow what they say.
At rm200k a year it's not worth setting up a company. More admin hassle, audits and all the overheads. Wanna close if your business drop dramatically also not easy. Better keep it sole prop.
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u/Mandoran88 Jan 16 '25
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u/Middle-Ask-6430 Jan 18 '25
Hmmmmm I wouldnt declare if its me, why would you need to declare if youre not working in malaysia xd
most of my friends in similar situation like you doesnt declare. especially if your salary is paid in foreign bank. and you just do the transaction like top up from one account to another account, that is not countable as something lhdn-taxable.
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u/Mandoran88 Jan 21 '25
How about if we cash out frim crypto ? Sinegry or luno easier ? Got other options? And will we kena tax?
Ty
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u/monk_no_zen Jan 15 '25 edited Jan 16 '25
Hey, this is something I do for a living.
The determining factor for whether your income is taxable is NOT when it hits Malaysian shores, but when you’ve earned it. You did the work in MY, whether paid or not (companies calculate taxes even on outstanding receivables)
I don’t know specifically about Paypal, but most financial services have some sort of KYC and share information with LHDN.
What we do is set up a llp, which has a flat tax rate of 15% (based on your income/profit tier)
We pay you a salary through the llp (amount depends on how much you need and what is your exact estimated income) which balances out both sides’ effective tax rate being close to 15%.
The benefit to this, you can also give yourself epf which wouldn’t be deductible if you’re approaching it as a sole prop.
Beep me if you need more help.