Introduction
If you feel tired of being trapped in the fixed routine or if the thought of sitting at one desk for the rest of your life overwhelms you. Then maybe it’s time you gave a shot at freelancing. Gigging opens up a whole new world of opportunities globally. Around 4 million Malaysians realize the benefits of freelancing and are a part of the ever-growing gig economy. If you are freelancing in Malaysia, you don’t have privileges such as EPF, insurance, pensions, etc. But yes, you do enjoy work-life flexibility and autonomy in work.
Do you want to become a part of the growing gig economy in Malaysia and reap the many benefits that it promises? Do you want to become your boss but don’t know how and where to begin? Here’s a quick read to guide you through the freelancing process.
Why is freelancing the future?
Freelancing enables a life free of ringing alarms, crowded commutes, and decking up on corporate suits. Factors such as the rising cost of living in Malaysia, advancement of digital platforms, company's inclination to cost-cutting via on-demand hire, a constant need to upskill and work in diverse environments create an undying hunger for freelancing opportunities.
The flexibility of choosing one’s schedule makes freelance jobs in Malaysia popular. Unemployed, young parents, students, or people with family liabilities, can maintain their income cycle by carrying out gigs ranging from android development, iOS development, graphic designing, web development to digital marketing. However, freelancing is a popular option among this bracket and applicable for anyone who wants to work independently.
Working from home avoids commuting, and fewer commuters result in
lower greenhouse gas emissions.
How to get started as a freelancer in Malaysia?
Local freelancing jobs are rare and poorly paid. Expats usually receive work permits or employment passes when they have a full-time job at hand. Employment passes are also tied to a particular job and organization. Therefore, a job switch requires another issuance of this pass. This stressful requirement is why foreign nationals and Malaysians prefer to freelance for companies outside the country.
If you want to freelance in Malaysia legally, you need to register for an income tax reference number called "Nombor Cukai Pendapatan." It is a unique number and issued according to the identity and nature of the taxpayer. To get the same, you can register at the nearest IRBM (Inland Revenue Board of Malaysia)/LHDN (Lembaga Hasil Dalam Negeri) branch OR register online.
What are the eligibility & requisites for becoming a freelancer?
Freelancing work in Malaysia requires the fulfillment of the following conditions:
- Above 16 years of age
- Citizen or permanent resident of Malaysia or hold an Employment Pass
- Person is not barred from rendering or receiving services under the law
General Requisites:
- An email ID
- CV/Resume
- Deck/Freelancer’s portfolio (where applicable such as a designer)
- Additional IDs proofs such as Passport, MyKad, Income Tax Number
- Photo (for profile)
How to find freelance work online?
Freelancing was always considered as a "side job" or an "unstable option." Thanks to the digital world and its miracles of connecting diverse people, freelancing, and the gig economy has seen a boost! While traditional options like word of mouth and relationship building still work, finding freelance jobs online has become a favorable route.
You must understand that your plan of action is highly dependent on the nature of your freelance work. This means that if you are moonlighting (making freelance as a sidekick), you can stay active on LinkedIn, Instagram, Facebook, Twitter, and other social media sites. Unlike full-time freelance work, it wouldn’t be necessary for you to register yourself on freelancing websites like Fiverr, Freelancer, Upwork, etc.
Apart from these sites, the best option for full-time freelancers would be to register on freelancer portals like Kaodim, ServisHero, and Skuad. These portals provide the best freelance work online and even remove the stress of advertising yourself and negotiating with the client. As per your level of experience, qualification, preference, they directly match you with clients so you can focus on your work!
How to receive payment for a freelance job in Malaysia?
If you are clueless about the freelance hourly rate you must charge for your hard work, we understand your plight. Often clients have the impression that hiring a freelancer means paying less for a particular job. We are here to tell you that you are worth more!
Payment means generating an invoice which in turn means calculating your work’s worth. It would help if you kept in mind a few things, such as the ongoing industry standards, your qualifications, work experience, prior clients and projects, the work expense you would incur during the project's period, and so on. It will also be prudent to put in your contract any dates related to invoicing and payments.
Standard modes of receiving payment are cash, cheque, and bank transfer. The digital world has made money transfer fast with various e-wallets. Stripe, Boost, GrabPay, PayPal, RazorPay, are few options in the market. So choose a method you prefer but do ensure to sign a written agreement with your client!
Pro Tip: Freelance and contract work can involve unsteady paychecks, and thus, to keep from being stressed with money woes, make sure you have a healthy reserve before you venture out and freelance full time.
Do freelancers need to pay tax?
While freelancing comes with the freedom to choose how you want to work, at what time you want to work, there is no choice when paying taxes. And if you are new to this freelancing game, make sure you play it safe. Nothing dampens the high of being your boss than the massive tax bills from the IRS. The IRS guidelines define freelancers as self-employed professionals. Hence you have to file your taxes as a business owner.
Word of Wisdom: In Malaysia, it's common for freelancers to register a sole proprietor business under a personal name, open a business account and then carry out most of their freelancing projects. Any income from freelancing, even if it’s a side gig, is then considered business income. Doing this helps them save taxes on freelance work as it opens the door to tax deductions. These deductions are not available on personal spending accounts.
Taxable Income and Tax Liabilities:
In Malaysia, tax rates are dependent on your residency and not on the employment type. Both full-time professionals and freelancers have to submit a tax file if their annual income exceeds RM 36000/year.
Tax for residents: For Malaysian and expatriates who qualify as residents, Malaysia has a progressive tax rate starting at 0% and capped at 30%, depending on your earnings
| Income (RM) |
Tax Rate (%) |
| 0-5,000 |
0 |
| 5,001-20,000 |
1% |
| 20,001-35,000 |
3% |
| 35,001-50,000 |
8% |
| 50,001-70,000 |
14% |
| 70,001-100,000 |
21% |
| 100,001-250,000 |
24% |
| 250,001-400,000 |
24.5% |
| 400,001-600,000 |
25% |
| 600,001-1,000,000 |
26% |
| 1,000,001-2,000,000 |
28% |
| >2,000,000 |
30% |
Tax for non-residents: The Malaysian government considers expatriates working in the country for more than 60 days & less than 182 days as "non-residents" and subjects them to a flat taxation rate of 30%. Non-residents are ineligible for tax deductions.
NOTE: It’s not uncommon for Malaysian freelancers to earn income from foreign companies (not based or registered in Malaysia). Well, the good news is, according to YA 2004, income (not capital gain) received from outside Malaysia is tax-free. Yay!
Can freelancers be exempt from taxes?
Freelancers are not tied to organizations and thus have to file their investments. Although it is not mandatory to contribute to social security and retirement schemes, it is advisable to do so. It will help you in the long run and reduce your taxable income for that fiscal year.
The Government of Malaysia has a Self-Employment Social Security Scheme (SESSS) for self-employed persons, including freelancers. The payable amount is dependent on the plan you choose, which can cover things like education, medical, dependent’s benefits, etc.
Further, like EPF for permanent employees, a scheme called the Voluntary Contribution with Retirement Incentive (i-Saraan) is for self-employed individuals. This scheme allows you to make contributions similar to what you make in a savings account, and therefore you can withdraw money anytime you want. A maximum of RM 60,000 can be contributed to this scheme annually.
Apart from these schemes, there are 21 other exemptions like insurance, donations, copyrights & patents, income from research findings, etc. Following are a few states of affairs for the tax relief:
| Tax Relief |
Amount (RM) |
| Individual and dependent relatives |
9000 |
| Only one mother and only one father |
3000(1500 each) |
| Supporting equipment for disabled self,spouse,children, parents |
6000 |
| Each unmarried child(under 18 years of age getting A+ education) |
2000 |
| Breast feeding equipments |
1000 |
| Private Retirement Scheme(PRS) |
3000 |
| Social Security Organization (SOCSO) |
250 |
| Life Insurance and EPF |
7000 |
Withholding Tax
If you are a non-resident individual freelancing in Malaysia, note that a withholding tax of 3% to 25% will be applicable on each payment to you by the client. The due percentage will depend on the services rendered. The tax deducted requires submission to IRB within a month of payment to non-resident freelancers.
Double Tax Agreement (DTA)
DTA is an agreement signed between two countries to help the workforce employed in both nations avoid double taxation. This agreement is beneficial for freelancers who generate income or capital gains from multiple sources. Malaysia has a double tax treaty with various countries, rates for which are available here.
Service Tax
It is a form of indirect single-stage tax imposed on any service made by a business of resident freelancer in Malaysia. A flat rate of 6% applies to the list of taxable services prescribed under the Service Tax Regulations 2018.
What is the frequency of tax liabilities for a freelancer?
It is mandatory for each earning more than RM 36,000/year to file taxes and report the same to the Inland Revenue Board (IRB) in Malaysia. The deadline for the same is 30th April (for offline channels) and 30th June for e-filing of the following year.
Income Tax Return (ITR)
To e-file your tax returns, proceed to the LHDN website, leading you to the myTax portal and choosing the ITR form that matches your business type. If you have registered your freelance work as a business, then you can use Form B. Else, you will need to file your taxes with Form BE. If you are a moonlighter, the taxable income is the sum on your Form EA plus your freelance profits, which you need to declare under "other gains and profits." Once all the declarations are made, the organization must pay any balance amount and a digital signature. Tadaa! That’s the end.
If you are eligible for a tax refund, it will be automatically credited into the account within 30 working days after submitting Income Tax Return Forms (ITRF).
RED ALERT! The Malaysian government has some strict policies laid out in case of a tax offense. So make sure you double-check all the relief and rebates and have physical proofs of each declaration for at least seven years. To know more, please refer to this.
Looks complicated?
According to the World Bank, about 26% of the Malaysian workforce consists of freelancers, and the numbers are growing. This proves that more and more people opt for a flexible lifestyle, more work autonomy, and diversity. In this light, practicing freelancing in Malaysia seems like a viable option. Skuad is happy to contribute to this growing gig economy by connecting Malaysia’s freelancers with growing businesses and startups across the globe.
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