Fail To Declare Income, IRB May Hit Influencers With "Best-Judgement Assessment" - Tax Lawyer

By N.Sevagamy

KUALA LUMPUR, Dec 4 (Bernama) -- Big brand deals, luxury cars, and flashy lifestyles may appear glamorous among social media influencers, but failing to declare such income could land them under the scrutiny of the Inland Revenue Board (IRB), says tax lawyer Nur Amira Ahmad Azhar.

The partner at Rosli Dahlan Saravana Partnership said IRB can issue a “best-judgement assessment” by estimating the individual’s income based on bank statements, high-value purchases, property, cars, and even through their visible lifestyle, which could result in a substantial tax bill.

“Income from sponsored posts, brand collaborations, affiliate sales, product endorsements, online merchandise, or YouTube, TikTok monetisation is treated as business or self-employment income and could be taxed under Section 4(a) of the Income Tax Act 1967. 

“Once there is regular income or commercial intent, IRB considers it to be running a business, even if done from home, without a company, or as a side activity. In practice, IRB may treat most bank deposits as income, unless they can prove otherwise, and assume very little or no deductible expenses, because you did not keep proper records. 

“Once a best-judgement assessment is raised, the burden shifts to them to prove that the income was lower or that they had genuine business expenses,” she explained.

Nur Amira said that without invoices, receipts, contracts or proper accounts, IRB will typically disallow claims for expenses, resulting in taxpayers potentially having to pay tax along with penalties and late-payment charges on an inflated amount that could have been reduced if they had made proper declarations from the outset.

She also reminded that failing to declare income can have serious consequences, including the risk of bankruptcy and travel restrictions.

Hence, Nur Amira advised influencers who have not declared income from previous years to make a voluntary disclosure to the IRB to avoid harsher penalties.

“Declare your income, submit amended tax returns, and pay the tax due. A voluntary approach is viewed more favourably than waiting for an audit. In essence, if income exists, it must be declared. Good records protect you. Absence of records exposes you,” she said.

-- BERNAMA