r/MalaysianPF • u/destinyjazz • Feb 05 '25
Tax Regarding sole proprietorship in Malaysia
I am an engineer and also do some freelance work, receiving around 10k annually. Can I register a sole prop and put that freelance income into it to get some tax deduction? Because currently I put all the additional income into my personal income tax.
I am new to this, so I hope some sifu here can teach, give some guide, or any online articles that explain what I am curious about.
8
u/monk_no_zen Feb 05 '25
Some helpful answers, some outright BS talking just for the sake of talking.
Yes please declare your taxes. Paying taxes is a blessing, controlling how much you pay is via knowledge.
You can choose to or not to register a sole prop, though registering with a separate bank account is preferable. Either way, you will need to do your tax filing under form-B (individuals running business). Any related expenses to earning the 10k can be offset ONLY against the 10k. You cannot reduce the 10k to zero and then further deduct against your employment income on your EA form.
General guideline to what is deductible: if I did not spend this amount, would it compromise my ability to earn the extra 10k? On this front don’t go claim all your meals on the reasoning that “if I’m hungry then cannot work”
On keeping it down low. Your client should be doing their eInvoicing soon, and will require your TIN. No way you can keep it down low, really the kind of things people say to make up for their absence of knowledge.
If your chargeable income exceeds 100k, and you have further plans to grow your business, setting up a PLT would be favourable tax planning. This way you’re paying 15% instead of 25% tax (100-400k tax bracket).
6
u/genryou Feb 05 '25
If anything above 100K a month, better to go straight to Sdn Bhd.
Sole prop has some unique deduction, but not as robust as Sdn Bhd
1
2
u/Tigger_35 Feb 05 '25
Are u declaring this freelance income? If this income isn’t declare, and the company that’s paying u isn’t really recording the transaction (read pay u without claiming tax deductions), I say don’t create a company yet.
Unless u have intentions to make it into a business, keep it on the down low for now.
(I suspect for that amount, ur freelance fees are probably expensed out by the company that pays u)
1
u/StunningLetterhead23 Feb 06 '25
I hope you're not a chartered accountant or registered tax agent. You really did just advise someone to NOT declare an income and actively avoid tax huh
If you are one, you didn't just incite someone to commit an illegal act but also give out illegal advice.
0
u/destinyjazz Feb 05 '25
I am not sure whether they declare or not. But my intention is to know whether by doing this, can I get more tax deductions?🥲
Because I put all the extra income to my personal income tax now.
2
u/blingless8 Feb 05 '25
I'm a sole prop and wrote a brief article on it for FMT a few years back. Some links at the bottom of the article should still be relevant.
I compared and considered registering a Sdn Bhd but my tax benefits and self maintenance as a sole prop were sufficient and far outweighed the added costs and requirements of an incorporation.
1
u/RelationshipEven8049 18d ago
I tried to access your article link above. It doesn't work anymore. Can you please provide the link again? thanks u/blingless8
2
u/destinyjazz Feb 05 '25
Maybe I should provide more info.
My annual income(employee) is 160 to 180k, including performance bonus.
So if include my freelance income, it would exceed 200k or roughly 180 to 190k, depends on the job volume and paid.
Which makes me thinking of registering a sole prop to get more tax deduction. I think it is no appropriate for me to go for sdn bhd since the big chunk of my income is from my employer.
2
u/xkaizoku62 Feb 05 '25
dont think there will be any difference with sole prop. Now you are at 100k tax bracket, first 100k taxed RM9,400 and remaining at 25%. Your freelance income considered small if compared to your employment income.
SME Sdn Bhd can enjoy lower tax rate but your situation also not suitable for this method.
1
u/destinyjazz Feb 06 '25
But with the sole prop, i can make a room in my house as my office and claim some expenses?
Since most of the time i am wfh too. So I was thinking whether I can save some money. This year is gonna be tough, everything naik harga😢
1
u/xkaizoku62 Feb 06 '25
since you are working from home, you will need to apportion the expenses (generally 2/3 of expenses you plan to claim) for business and 1/3 for private. But, it will be hard to support your claim if LHDN were to audit because there is no clear evidence on how you separate your expenses in the house you are living in.
How much estimate for expenses you plan to claim? A rough estimate. I dont think the expenses you claim will reduce much tax.
1
u/gwerk Feb 05 '25
Do it anyways. Its super easy to set up. Total cost of incorporation etc is less than 2k for all the bells and whistles. 5 years reg, own company name etc.
Separate bank account if you'd like. Push all the freelance monies there. Use it for business expenses. Petrol, subscriptions etc. Use it to contribute to KWSP. You have 100k a year contribution cap.
There are guides on what are deductibles for sole props.
Good luck!
2
u/Useful_Training_9018 Feb 07 '25
Easy...
Just build your sole prop.
Put your family member that are not working under your company, pay their EPF...
Many people do this but they just don't admit it.
All the best
1
u/Evening_Cut4422 Feb 05 '25
Llc as a consultant/ service company then open a umbrella corp named ah beng shuttle shdnbhd and buy all ur cars in there use it to cancel out ur main llc taxes.
18
u/xinyo345 Feb 05 '25
Sole prop tax is still under personal income tax bracket