Sole proprietor tax Malaysia: rate, filing, deadline

Do sole proprietors pay income tax in Malaysia?

Yes. If you run a sole proprietorship (perniagaan milikan tunggal) and you are a Malaysian tax resident, your business profit is taxable income. A sole proprietorship has no separate legal identity from you, so there is no company tax. The profit is simply added to your personal income and taxed at the individual rates. You report it on Form B, the income tax return for individuals with business income.

This is true even if the business is small, part-time, or run alongside a salaried job. If you have a salary plus a side business, the salary and the business profit go on the same Form B and are taxed together. Not sure whether you are a sole prop or a freelancer in LHDN's eyes? The tax treatment is the same, and our freelancer tax guide covers the overlap.

What is the sole proprietor tax rate?

There is no special "sole proprietor tax rate." Your business profit is taxed at the same progressive individual rates as everyone else, from 0% on the first RM5,000 of chargeable income up to 30% at the very top. The more you earn, the higher the rate on each extra slice, not on the whole amount. Here are the resident individual rates for YA 2025 and YA 2026 (the brackets are identical for both years):

Two things soften the bill. Everyone gets an automatic RM9,000 individual relief, and if your chargeable income is RM35,000 or less you get a RM400 tax rebate that wipes out most or all of the tax. So a sole proprietor with a modest profit often pays very little, or nothing.

Which form do I file, and when?

Sole proprietors file Form B (the business-income return), not Form BE (which is for employment income only). For YA 2025 income earned in 2025, the deadline is 30 June 2026, with an automatic grace period to 15 July 2026 for e-Filing. Since YA 2024, paper Form B is no longer accepted, so everyone files online through the MyTax portal, which means 15 July is the practical date for almost everyone.

Miss it and the late-filing penalty starts at 10% of the tax due, rising to 15% if it stays unpaid after 60 days. If you genuinely cannot make it, you can apply for an extension through MyTax before the deadline, but approval is not automatic. Our Form B deadline guide has the full calendar, and how to file Form B walks the e-B screens.

Am I taxed on sales or on profit?

On profit, not sales. This is the single most important thing to understand. Your taxable business income is your gross sales (revenue) minus your allowable business expenses for the year. If you sold RM120,000 of goods but spent RM48,000 running the business, you are taxed on RM72,000, not RM120,000.

This is also why keeping records matters so much. Every legitimate expense you can show is a ringgit of profit you are not taxed on. Lose the receipts and you cannot defend the deduction in an audit, so in practice you lose the deduction.

What business expenses can I deduct?

A sole proprietor can deduct any expense incurred wholly and exclusively to earn the business income, under section 33 of the Income Tax Act 1967. Common ones include:

• Stock and cost of goods sold
• Rent, utilities, and internet for business premises
• Staff wages and the EPF/SOCSO you pay for staff
• Delivery, packaging, and courier costs
• Marketing, advertising, and platform/commission fees
• Business-use portion of your phone, car, and tools (claim only the business share)
• Professional fees (accounting, licences, SSM renewal)

Bigger one-off items like a laptop, machinery, or a delivery vehicle are not deducted in full in one year. Instead you claim capital allowances, which spread the cost over time, with a 100% write-off allowed for small-value assets up to RM2,000 each. Personal and private spending is never deductible, and neither is your own "salary" as the owner, because the profit already is your income.

Worked example: a small online seller

Aishah runs a registered enterprise selling skincare online. In 2025 she had RM120,000 in sales and RM48,000 in genuine business expenses (stock, packaging, courier, ads, the business share of her phone). Her only relief here is the automatic RM9,000. All figures are computed the way the MyTaxMate engine does it, on the YA 2025 rates.

Now the same business, but Aishah does not track expenses and ends up taxed on the full RM120,000. After the RM9,000 relief her chargeable income is RM111,000, and the YA 2025 rates put her bill at RM12,150. Same shop, same year. Keeping her receipts and claiming RM48,000 of real expenses saved her RM9,220. That is the whole case for record-keeping in one number. And claiming a few more reliefs, such as EPF i-Saraan, lifestyle, or insurance, would push the RM2,930 down further.

Do I need to register with SSM and LHDN?

Two separate things. To run a business legally you register the enterprise with SSM (the Companies Commission). Separately, for tax you need a tax file and a Tax Identification Number (TIN) with LHDN so you can file Form B. From 1 March 2026, every MyKad, MyPR, or MyKAS holder already has one official TIN, so you may already be in the system. You still have to file once you have business income, even if you also have a salaried job.

What about CP500 instalments?

If you have business income, LHDN may issue a CP500 notice asking you to pay your estimated tax in six bi-monthly instalments during the year, rather than in one lump at filing. It is a prepayment, so it is offset against your final bill on Form B. For YA 2026, LHDN has said it will not impose penalties on CP500 instalments for taxpayers with non-employment income during the transition period, but you should still pay them to avoid a large balance at filing. If your CP500 estimate is too high or too low, you can revise it via CP502 by 30 June.