If you are running a small business online by selling products and services via Facebook, Instagram, Mudah, Lazada, Shopee, etc., and you have developed your own brand. In that case, this guide is designed to help you to get your business taxes ready.
In the following sections, we outline in detail what you have to do when completing taxes. But do keep in mind that this is just a guide. Please consult Lembaga Hasil Dalam Negeri (LHDN) or a tax consultant for individual cases.
1. Register your business
Visit the Companies Commission of Malaysia (SSM) website to register your business. For small-scale online business owners, registering as a Sole Proprietorship (single owner) or Partnership (more than one owner) is enough.
Alternatively, you could also visit the nearest SSM branch, pick up and complete the forms according to the example they provided, and get a number. Come up with a few business names in case your first choice has already been taken. The representative will double-check your information. Lastly, make the payment and wait to receive your business certificate.
2. LHDN account
You should register for an LHDN account, which can also be done online. You should register as an “Individual with business income” if you are running a business, although you might still be employed.
Evading taxes on online or e-commerce income is a criminal offence, which will result in being fined, imprisoned, or barred from leaving the country.
If any uncertainty arises regarding whether your business model should be taxed, visit LHDN’s website to view the taxation guidelines on e-commerce.
Now that you are certain of the taxation issues, you must submit Form B. Here is the link to the comprehensive guidebook on Form B. Form B can be found under e-Form. Don’t worry about calculating the tax amount. It is automatically calculated based on your input in e-Hasil.
3. Have a dedicated bank account/credit card for business use only.
Open a business bank account for running your online business instead of relying on your personal savings account. Business-related expenses include buying stock and equipment, paying employees, marketing and advertising. Ensure your business account is used solely for this type of payment. Avoid mixing it with personal expenses like buying groceries, paying for education, car repairs, etc.
4. Keep a record of your business income, expenses, and receipts.
The cheapest way is indeed to create an Excel document. But did you know that accounting software is not only affordable but also more flexible in terms of its usage, which can grow your business?
That is what we have to offer: some of the most popular accounting software for businesses in Malaysia. It allows you to sync your bank statements, which means that whenever you make a transaction via your bank, it will keep a record. In this way, you can avoid the hassle of having to juggle through piles of receipts.
In addition, it also enables you to generate a monthly or yearly report about the finance of your business which consists of essential data and metrics. The accounting software takes small company bookkeeping to a whole new level, which you don’t want to miss as a small business owner.
5. Max out your tax relief and tax rebates where you can.
Last but not least, tax relief and tax rebates can reduce your taxable income. These are announced annually in the National Budget, with slight changes every year.
Remember to keep the receipts and records for:
- EPF & SOCSO (mainly for employed individuals, unless you make self-contributions)
- Education fees
- Medical expenses, equipment and care for self, spouse, parents, and children
- Sports equipment (not attire)
- Investments like PRS and SSPN
- Donations (Muslims can claim zakat as a tax rebate)
In a nutshell
Getting your business tax ready could be a hassle since you need to go through a lot of paperwork. Fortunately, we have outlined the necessary steps to make it a smooth and headache-free process.
When it comes to accounting, remember to track your expenses and income. That’s why we offer you the accounting software for managing a company’s bookkeeping. For more information, feel free to get in touch with us.