Introduction
The endemic Covid-19 has completely revolutionised the business landscape, moving the companies in engaging contract workers, independent consultants, casual workers, or GIG labours instead of the usual full-time employees. The uncertainties of economic growth affecting business sustainability, moving the escalated of these group of work force being a new norm now.
Business income [s 4(a)]
Business income is given preferential tax treatment and accorded the followings tax advantages: –
(a) Current year loss
Revenue expenses incurred in a year of assessment (YA) exceeded gross income is known as current year business loss.
Other income can utilise this loss resulting in lower taxable income in the particular YA.
(b) Unabsorbed business loss
The excess current year business loss in a YA is able to carry forward to the next YA, to be set off against business income which may not be the same source.
(c) Capital allowances
Qualifying assets such as mobile phones, laptops (desktop, tablet etc), furniture and fittings, air conditioner, motor vehicles required to be used in the business is eligible for capital allowances. The rate ranges between 14% to 20% on the qualifying cost, to be deducted annually.
Provision of services
The provision of services as an independent contractor, casual workers vary in: –
(a) Intensity, extensity and complexity of the works provided;
(b) Frequency of the services;
(c) Quantum of the fees.
Taxation always is an art and never an exact science. Generally, the provision of services is to be treated as business income upon fulfilling one or more of the following criteria: –
- the services are register as business with SSM being micro business of sole proprietor;
- the services are actively provided over at least 4 days in a week (or at least 20 days in a month);
- number of customers > 1;
- Quantum of fees consistently received from various customers.
Independent consultant, contractor, or casual worker
Business income on one hand enjoying the tax advantages equally would suffer cash flow constraints as business income requires to pay 6 bi-monthly tax in the current YA, beginning from March, May, July, September, November, and January of the following year.
The estimated sum of tax is pre-determined by IRB in a YA and would inform the taxpayer in February of the particular year.
Other income requires only to pay tax at one sum upon submission of tax return in the following year. Administrative is easy and convenient.
Tax return and submission
Business income would be reported in Form B, submitted on e-filing on 15 July of the following YA. The business income of the calendar year 2024 could require to submit Form B of YA 2024 on or before 15 July 2025.
Other income would be reported in Form BE, submitted on e-filing on 15 May of the following YA. Other income of the calendar year 2024 could require to submit Form BE of YA 2024 on or before 15 May 2025.
Revision and payment of tax
Business income can revise its bi-monthly instalment twice in the month of June and in the month of October, in the event the business income foreseen to be lower than the IRB estimation with the downward revision of tax, the remaining bi-monthly instalment will be lower, which refers to 4 months (on June revision) or 2 months (on October revision).
On 15 July of the following year, the taxpayer would pay the net sum computed as follows: –
RM | |
Actual tax | xx |
(-) tax by instalments (6 bi-monthly) (revised) | (x) |
Final tax | xx |
Other income would pay the actual tax on 15 May of the following year. Individual would paid the final tax for YA 2024 on 15.07.2025.
Conclusion
The assessment of income receipt whether business income or other income is to be assessed based on factual matrix of the case; varies depending on the extensiveness, frequency and quantum of the fees received.
Taxpayers need to examine its scenario and fulfil its obligation accordingly.
