Influencers who don't declare income from paid reviews can face up to 6-month jail, here's how to report them to LHDN
As we’ve elaborated in our previous article, it is now the dreaded ‘income tax season’ in Malaysia, with many taxpayers rushing to file their Income Tax Return Form (ITRF) before the deadline to avoid any legal trouble from the Inland Revenue Board (LHDN).
As per Section 77 of the Income Tax Act 1967 below, the due date for individuals who don’t have business income is 30 April, while those who have business income have an extended period until 30 June to declare their income for the year prior. The due dates for settling any tax balances or arrears are also the same, with any late payment incurring a 10% penalty charge on the balance of tax not paid from LHDN.
With that in mind, Kuala Lumpur LHDN Principal Assistant Director Syed Mohd Syukree Syed Mohd Kamil recently issued a reminder to business owners during the Bernama Radio “Tax Clinic” programme that they are required to report their income even if they suffer losses.
During the programme, he was quoted by Bernama as saying that ‘Instafamous’ personalities, influencers, YouTubers or anyone earning income from paid reviews or receiving payment for their content or services are considered individuals running a business by LHDN. Hence, it is a criminal offence for them not to declare income from these avenues within the aforementioned stipulated period.
So, what legal actions do these so-called influencers face if they fail to report income from their content and paid reviews to LHDN? Can Malaysians anonymously report them to LHDN if they have information about income not declared?
Well, join us as we go in-depth into the matter below.
Income Tax Act 1967
For context, Section 4 of the Income Tax Act 1967 below prescribes the types of taxable income in Malaysia.
Circling back to the subject matter at hand, given that LHDN considers content creators as individuals running a business, income from paid reviews can be considered as gains or profits from a business, as prescribed by Section 4(a) of the Act. Moreover, payments these influencers receive from their content, such as the monetization from their YouTube or TikTok videos may also fall under royalties as per Section 4(d) of the same Act.
Therefore, according to the Income Tax Act 1967, these incomes are indeed taxable in Malaysia.
Hence, should they fail to declare this income during the stipulated period, they may face action under Section 112(1) of the Income Tax Act 1967 below.
The provision asserted that anyone who without reasonable excuse failed to furnish a return or give notice of changeability is considered to have committed an offence.
If convicted, they may face a fine between RM200 to RM20,000, or imprisonment of up to 6 months, or both.
Additionally, Section 112(1A) of the Act prescribes that if an individual fails to declare their income for 2 years or more without reasonable excuse may face a fine between RM1,000 and RM20,000, or up to 6 months in jail, or both. Furthermore, they may also be imposed with a special penalty of up to 3 times the amount of the tax charged on the chargeable income of that person for those years of assessment.
Meanwhile, Section 112(2A) establishes that the court may order those convicted under Section 112(1) to comply with the relevant provision of the Income Tax Act 1967 under which the offence has been committed within 30 days, or such other period as the court deems fit, from the date the order was made.
How to report tax evasion and other fraudulent or criminal activities to LHDN
As per LHDN’s official website, there are 3 ways in which the public can lodge a report about tax evasion or any other fraudulent or criminal activities to the agency. These include:
Online: Lodge a report via the e-Pelarian Cukai platform
Walk-in: Lodge a report by personally visiting the LHDN State, Intelligence and Profiling Section at any of these locations
Physical letter: Lodge a report by writing a letter to this address – Seksyen Aduan dan Sumber, Bahagian Perisikan Jabatan Perisikan Dan Profiling Lembaga Hasil Dalam Negeri Malaysia Level 3, Menara 2, No. 3, Jalan 9/10, Seksyen 9, 43650 Bandar Baru Bangi,
LHDN added that this information on the tax evader is required in the report:
Name, IC number, full address
Nature of evasion
Supporting documents (if any)
Other relevant information
For the e-Pelarian Cukai platform, the first 2 sections of the system request that you provide your details as the complainer (optional) and the tax evader’s details. Afterwards, you would be shown a summary of the complaint and finally confirmation of submitting the report.
In using the system, LHDN urged users to provide information related to any tax evasion that is accurate, correct and clear. As for general information or information that is only based on observation of the ownership of valuable assets or a luxurious lifestyle, LHDN will only consider it if there is an issue of tax evasion.
LHDN also iterated that information received via the platform and the complainer’s identity would be classified and confidential as per Section 138 of the Income Tax Act 1967.
However, LHDN clarified that it won’t notify you of any action status regarding the complaint submitted and that actions on information transmitted will be conducted following work procedures based on current legal provisions.
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