Online selling becomes taxable the moment it turns into a business. If you buy or make things to sell them at a profit, that profit is taxable, no matter how small it is or whether you treat it as a side hustle or a hobby. But if you are only clearing out things you once bought for yourself, selling them on Carousell or eBay, you’re not running a business, and there is nothing to declare.
The line between the two is not always obvious, especially once a bit of casual selling starts to grow. So it helps to know how LHDN decides which side you are on, how your profit is worked out once you are on the business side, and how to declare it.
What Counts As A Business
LHDN does not draw the line at a fixed ringgit amount. It looks at the pattern of what you are doing, using a set of factors known as the badges of trade. LHDN weighs them together to judge whether your selling looks like a business or like a person clearing out things they no longer need.
Say you spend six months selling dozens of items on Carousell and a few vintage pieces even go for more than you paid. You’re still not trading, because you bought those clothes to wear, and you’re not restocking. The volume of pieces sold is high, but every other factor points to a personal clear-out.
Now imagine you buy thrift bundles every week, pick out the pieces you think will sell, and list them through a shop with its own name and following. That’ll look less like a hobby and more like a trading business. You’re buying with the intention of making a profit, using proceeds from earlier sales to fund new stock, and turning over the items relatively quickly. That profit is taxable, even if the amounts involved are small.
How Your Taxable Profit Is Worked Out
Once your selling is a business, you pay tax on your profit, not on the total amount you sell. You subtract the costs you spent to earn that income from your sales, and what is left is the profit that gets taxed. For an online seller, those costs typically include stock, platform and payment fees, packaging, postage, and advertising.
Which costs count is where sellers slip up. You deduct the cost of the stock you actually sold that year, not everything you bought, so unsold stock waiting in storage does not count until the year you sell it. For a cost that is part business and part personal, such as your phone bill, you claim only the business share.
Put together, a year of selling might look like this:
You are taxed on the RM12,300 profit, not the RM40,000 that came in as sales.
What The Profit Costs You In Tax
The RM12,300 does not have a tax rate of its own. It is added on top of your other income for the year, such as your salary, and taxed at whatever rate applies to that top slice of your income. So the same RM12,300 profit costs two people very different amounts, depending on what they already earn.
The figures are rough and ignore reliefs, but the logic is the same. Because business profit sits on top of your salary, the more you already earn, the more each ringgit of profit is taxed. A small profit may also attract no tax at all once your reliefs are counted, but it still has to be declared, which is a separate thing from whether any tax ends up payable on it.
How To Declare Your Online Business Income
If your only income is a salary, you file Form BE. Once you have business income of any kind, including from online selling, you move to Form B. Your salary and your business profit then go on that same form together.
Form BE is due on 30 April, but Form B is due on 30 June, with a grace period to 15 July if you file online. Both are filed through MyTax, LHDN’s online portal. Work out your profit before you log in, and keep your records for seven years in case LHDN asks to see them.
If you are filing business income for the first time, our guide on filing tax for a side business walks through the return step by step.
What To Do If You Have Not Been Declaring
Online marketplaces such as Shopee and Lazada can share seller information with LHDN, so unreported online income can surface later even if no one flagged it at the time.
If you have been running a business for a few years without declaring the income, it is better to put it right yourself than to wait for LHDN to raise it. Coming forward is generally treated more leniently, and LHDN has run voluntary disclosure programmes for exactly this situation. A licensed tax agent can help you work out what to report for the earlier years and handle the paperwork, which usually costs far less than penalties on an assessment LHDN raises itself.
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