Having an online business instead of a brick and mortar storefront can save you from additional expenses such as rent and utilities. But, if you think you can escape from paying tax, then you’re wrong. There are certain taxes that you can’t escape, be it physical store or online businesses.
If you have an online startup – selling products from Facebook, Instagram, Carousell, Mudah, Shopee, etc, you need to understand your tax liabilities.
These info are taken from Ringgit Oh Ringgit. For better clarification, please consult LHDN or tax accountant to avoid any misunderstanding.
1. LHDN account
Did you know that not paying taxes on online e-commerce income is an offense? If you evade, you may be fined, imprisoned or worst, barred from leaving the country. For individual with business income, you are required to submit Form B.
But i’m not sure if my business should be taxed or not? Fret not, check the guideline on taxation on e-commerce provided by LHDN here.
You only have to pay taxes for your e-commerce business if you make over a certain amout annually. The amount set is changing yearly. So, if you don’t meet the amount, you should declare it anyway to keep your record clean.
The tax rate will depend on your income. If you’re not sure about the tax rates you can always check online.
2. Registered business
Next step is you need to go to the Companies Commission of Malaysia (SSM) website. You can register as Sole Proprietorship, Partnership, Limited Liability Partnership or Company. If your business is a small-scale online business, Sole Proprietorship or Partnership is sufficient.
You can go to any SSM branch near you and fill up the forms. Prepare with a few business name options in case your first choice has been already taken. Once you’ve made the payment, you will receive your business certificate.
3. Open a banking account/credit card only for the business
Don’t mix up your personal account with your business account. Use your business account solely for business-related expenses such as:
- Buying stock and equipment
- Paying staff
- Marketing and advertising
Any payment should be transferred from your business banking account and business credit card.
4. Keep all the expenses, receipts and income in a systematic way
You don’t need to spend on getting expensive software. The cheapest way you can do is by using Excel document. Sort your expenses by month and year. Each expenses must incude with receipts as a prove and you need to keep it for more thana 5 years. So make sure you have a systematic way of organising receipts.
5. Make use of tax relief and tax rebate when you can
Tax relief and tax rebates help tax payers to reduce the burden on paying the tax. It changes slightly every year so you better keep an eye on the updates. Below is the list of tax relief and tax rebates claimable in 2017:
Always keep receipts and records for:
- EPF & SOCSO
- Education fees
- Medical expenses, equipment and care for self, spouse, parents and children
- Sports equipment
- Zakat (only for muslims)