Ringgit Bytes: Are Side-Gig Income and Share Gains Taxable?

26 June 2022

It’s that time of year again – tax season. Do you know if your side-gig income and share profits are taxable? What happens if you don’t declare your income to the Inland Revenue LHDN (Lembaga Hasil Dalam Negeri)?

On this episode of Ringgit Bytes, Mr Thanneermalai, Managing Director of Thannees Tax Consulting Services discusses whether your side-gig income or profits from share trading are taxable.

Video Transcription


Roshan Kanesan:

Have you taken on a side-gig to supplement your income? Well, if you have, then you might want to pay attention because its that time of year again. Nope. Not the holidays. It’s tax season.


 Roshan Kanesan:

Today, we sit down with Thanneermalai, managing director of Thannees Tax Consulting Services to discuss whether your side-gig income or profits from share trading is taxable.

What income is taxable?


Actually all income is taxable in Malaysia. The only income that’s not taxable in Malaysia is capital gain. There’s an exception when you deal with real property then you’re subject to real property gains tax. Otherwise, only income that is earned or income that is derived in Malaysia, that’s taxable in Malaysia. Otherwise, all capital gains are not taxable in Malaysia.

What is the difference between gains and income?


Actually there’s no difference between income and gains. If gains are of an income nature then they are taxable. But if gains are of a capital nature then they are not taxable. It’s as simple as that. I mean, if you’re dealing in property, let’s say you are dealing and you are a regular dealer. You’re dealing with ten properties, you’re buying properties and selling, buying, selling, buying, selling on a regular basis. Your frequency is high, then that’s income because you are generating that as part of your business, as part of your trade. Therefore, it becomes income. Whereas if you actually bought that one or two or three properties, kept it for five years or ten years and therefore you wanted to keep it as an investment then that is capital. And the gain you make on that capital is actually capital gain. That’s something that you are actually growing on a longer term basis and you make a gain. That’s called realisation of the gain and that’s capital gain.

Does this mean I need to pay tax on income from my side gig?


If you actually have you know, generated income out of your side gigs like for example if you are in employment and if you have an internet site or platform and you’re generating this income in the evenings, etc., any odd hours you have that you’re doing it on a regular basis because that is business. Because even if you do it once in awhile, but if your intention is to do it on a regular basis, then it becomes business because that’s a term called ‘adventure in the nature of trade’. Even if you do it once but if you have the intention to actually make a profit within a short period then that falls within something called ‘adventure in the nature of trade’ which is a one-off gain, also can be subject to tax. You’ve got to be very careful.

What about the profit I make from share trading?


Share trading is an area of real problems. You know this is an area where the tax authorities, they have the right to tax if you are regularly trading. If you are on or off, or you buy on a regular basis. Like last year, if you think about it, everybody was on the computer buying and they’re all going to subject to it. If the revenue wants to attack them, they may be all subject to income tax because they were doing a lot of trades, you know, and therefore they are caught. So it’s high time the Inland Revenue and the Ministry of Finance policy division should decide. Because if you want to encourage this kind of trading then don’t tax them. If your intention is not to tax, then come up with clear guidelines. Tell us that perhaps if you keep it for one year or perhaps you do twenty transactions a year, you will not be covered. Or maybe more than fifty transactions and that’s it. We need policy guidance. Otherwise, we are living in cloud cuckoo land and we don’t know what is going on and the tax payers are left with not knowing when they’re going to be caught. Effectively, now, most taxpayers can be caught because they are regular traders.

Is there income that is tax exempt?


You look at something called schedule six and that specifically spells out your fixed deposits. And if you have fixed deposits, that’s exempt. And there are other income that is exempt. For example, when you retire, if you receive a retirement gratuity it specifically says so or it will tell you that certain individuals or certain companies are exempt. Look at schedule six, there’s a particular schedule there. You’ve got to look at it. And there are hundreds of these exemptions. It specifically will take you out of the whole tax net.

Is dividend income taxable?


Dividend income is not taxable because it’s already been taxed at the company level. It’s called single tier dividend and it’s not taxable.

What happen if I don’t declare my income to the Inland Revenue?


They will come after you. That’s all. They’ll come after you and they’ll probably catch you and they’ll say you have not filed your return correctly and you’ll be subject to a minimum 45% penalty. But these days the penalty rates can go up to 100%. So watch it. It’s not advisable, not to declare, please declare.




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