Sole Proprietor Tax in Malaysia: A Form B Guide for Small Business Owners

If you run an enterprise (sole proprietorship) or freelance, your business profit is taxed as personal income — not at the 24% corporate rate. Here's how it works.

You file Form B, not Form C

• Form B — individuals with business income (sole proprietors, freelancers, partners).
• Form C — companies (Sdn Bhd).
• Deadline for Form B: 30 June (paper) / 15 July (e-Filing) — later than the employee Form BE.

How your tax is calculated

Business revenue
 − allowable business expenses
 − capital allowances
 = Adjusted business income
 + other income (employment, rental…)
 − personal reliefs
 = Chargeable income → individual tax rates (0%–30%)

So a sole proprietor uses the same progressive personal rates and the same reliefs (RM9,000 personal, EPF, lifestyle, etc.) as an employee — just with business profit added in.

Allowable expenses

Expenses incurred "wholly and exclusively" to produce the income are deductible: rent, staff wages, utilities, supplies, business travel, professional fees. Private/domestic expenses are not.

Capital allowances instead of depreciation

You can't deduct accounting depreciation, but you claim capital allowances on equipment, machinery, and vehicles instead. Unused allowances carry forward.

Should you stay a sole prop or incorporate?

• Sole prop: simpler, taxed at personal rates — efficient at lower profits, but you're personally liable.
• Sdn Bhd: SME rates (15%/17%/24%), limited liability, more compliance (CP204, audited accounts). Usually worth it once profits are sustained and higher.

Don't forget

• Keep proper records for 7 years.
• You may need to pay tax in instalments (CP500).
• Register for SST if your taxable turnover crosses the threshold.

Estimate your Form B tax with the free sole proprietor calculator — enter revenue, expenses and capital allowance to see your tax at individual rates.