Income tax tips for Malaysian artists

Income tax tips for Malaysian artists

We’ve done the homework and put together a guide to help local artists through this tax season.

By Tho Mun Yi

Artists, the first thing you need to ask yourself is, “Do I have an annual income of RM34,000 and above (after EPF deduction)?”. If the answer is “yes”, then you are required to register a tax file with the LHDN so read on.

The information below was compiled from the Inland Revenue Board of Malaysia (LHDN) and other local financial online resources. We’ve also put in relevant links for your further reading.

Tax exemption

A certain portion of an artist’s income in the form of royalties from publications of artistic works, recording discs, tapes, and musical compositions are tax exempted.

A maximum exemption for royalties of up to RM10,000 for publications of artistic works (excluding paintings), recording discs, or tapes; and RM20,000 for publications of paintings or musical compositions are granted.

The income of a performing artist derived from cultural performances is tax exempt with approval by the Minister.

Any foreign income received from overseas is exempted from income tax as well. [1]

To start a business or not

So here is where artists need to pick a decision when filing tax. Artists can be grouped into two broad categories for tax purposes – artists who do not carry businesses thus filling the BE forms and artists who carry art businesses thus filling the B forms.

The artist who fills the BE Form

Good news is you are relieved from having to do any accounting. It is however mandatory to keep track of your income.

The bad news is you are not eligible to deduct any expenses from your income. Paper, paint, frames, brushes are all not deductible from your income. You are only entitled to the tax reliefs as listed here. Maybe some accounting does not sound too bad after all.

The artist who fills the B Form

The bad news is you are required to keep your books of accounts along with your supporting documents for seven years.

Good news is you can deduct your business expenses from your income in the form of allowable expenses. Even your accounting costs, if you decide to hire a tax accountant to manage your accounts, is tax deductible.

What are the allowable expenses

Allowable expenses are the business costs essential to running a business. These include all forms of costs incurred in running an art business like rent, utilities, loan interest, salaries and wages of staff, contracts and subcontracts, commissions, bad debts, travelling and transport, repairs and maintenance, promotion and advertisement. [2]

Do take note that personal expenses are not tax deductible. For instance, only travelling expenses to a client’s location are allowable expenses. So long as it is a justifiable business expense under a business name, it is tax deductible. If you are not sure, it is best to ask a tax accountant.

Separate bank and credit accounts for your art business

Open separate bank and credit accounts solely for your art business. This not only shows your professionalism but also helps you organize your earnings and expenses easily.

If it makes more sense for you to run an art business, a registration fee starting from RM30 will be charged by the Companies Commission of Malaysia (SSM) upon registering your business.

With a looming April 30 deadline to submit the BE form and June 30 deadline to submit the B form for business tax, it is worthwhile to complete the e-filing ahead of time.

Note: This article should not be construed as tax advice. Whenever in doubt, please consult an income tax professional or the LHDN.

Additional resources:

For guidelines on tax deduction for sponsorship for arts, cultural and heritage activities and programmes, check out this simple process flow chart by CENDANA. For further information, download the guideline booklet by the Ministry of Tourism, Arts and Culture.