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 realise 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 own boss but don’t know how and where to begin? Here’s a quick read to guide you through the freelancing process.
Freelancing enables a life that is 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 need for freelancing opportunities.
The flexibility of choosing one’s own 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 not just a popular option among this bracket but applicable for anyone who wants to work independently.
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 organisation. Therefore, a job switch requires a reissuance of this pass. This 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.
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 law
• An email ID
• Deck/Freelancer’s portfolio (where applicable such as a designer)
• Additional IDs proofs such as Passport, MyKad, Income Tax Number
• Photo (for profile)
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, relationship building still work, finding freelance jobs online has become the favourable routes.
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 side kick), 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 take away 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 just focus on your work!
If you are clueless about the freelance hourly rate you must charge for your hard work, we can 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. There are a few things you must keep in mind. Such as the ongoing industry standards, your qualifications, work experience, prior clients and projects, and 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.
Common modes of receiving payment are cash, cheque and bank transfer. The digital world has made money transfer fast with various e-wallets. Apps such as 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.
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 it comes to paying taxes. And if you are new to this freelancing game, make sure you play it safe. Nothing dampens the high of being your own 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 as 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 spendings accounts.
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 above 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
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 Malysian 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. Yayy!
Freelancers are not tied to organisations and thus have to file their own investments. Although it is not mandatory to contribute to social security and retirement schemes, it is advisable to do so. It will not only help you in the long run but also 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, there exists a scheme called the Voluntary Contribution with Retirement Incentive (i-Saraan) 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, use of copyrights & patents, income from research findings, etc. Following are a few state of affairs for the tax relief:
In case 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.
DTA is an agreement signed between two countries to help the workforce employed in both nations to avoid double taxation. This is especially helpful for freelancers who generate income or capital gains from multiple sources. Malaysia has a double tax treaty with multiple countries, rates for which are available here.
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% is applicable to the list of taxable services prescribed under the Service Tax Regulations 2018.
In Malaysia, it is mandatory for each individual earning more than RM 36,000/year to file taxes and report the same to the Inland Revenue Board (IRB). The deadline for the same is 30th April (for offline channels) and 30th June for e-filing of the following year.
In order to e-file your tax returns, proceed to the LHDN website which will lead you to myTax portal and choose the ITR form which 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, any balance amount is to be paid along with a digital signature. Tadaa! It’s done.
If you are eligible for a tax refund, it will be automatically credited into the account within 30 working days after the submission of Income Tax Return Forms (ITRF).
RED ALERT! 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 7 years. To know more, please refer to this.
According to the World Bank, about 26% of Malaysian workforce consists of freelancers and the numbers are growing. This proves that more and more people are opting 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.
Disclaimer: The information provided in this blog is neither exhaustive nor absolute. This article does not substitute legal obligations and procedures. To start freelancing in any country, you should seek professional advice. For more details on each section, connect with Skuad experts.