Tax Treatment on Income of Social Media Influencer in Malaysia
With the growth of the digital economy, social media influencing has become a recognised income-generating activity in Malaysia. The Inland Revenue Board of Malaysia (“IRBM”) has formalised the tax treatment of income derived by social media influencers in Malaysia, providing clarity to the public on the applicable tax obligations.
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Social Media Influencer
A social or digital media influencer is an individual who has the power to influence others through their power, knowledge, position or relationship with users through social or digital platforms. Usually these are individuals who have the ability to generate a decent income through activities as influencers on social and digital space. Given their ability to generate income from social media platforms or marketing activities, social media influencing is recognised as a legitimate career.
Activities of an Influencer
An individual can be considered as an influencer if they engage in the following activities:
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Audio or video production, or written content on social media;
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Appearing in social media related activities, programme or events;
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Engaging in social media with the purpose of advertising or promoting; or
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Participating in social media activities that results in receiving payment, gifts or any other benefit from any party.
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Categories of Influencer
Social media influencer can typically be classified into two categories:
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Category
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Description
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Example
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Individual Influencer
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Individuals who create content
intended for public engagement, aiming to build trust and establish a
relationship with their audience virtually.
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Any individual who is carrying
out the activities of an influencer. They could be:
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Object-Based Influencers
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Objects such as cartoon
characters, fictional characters in films or dramas, caricatures, or logo /
symbols of an organisation that have a social media presence.
The social media account is
typically run by the individual or company that owns the publishing rights.
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Cartoon characters: Pusheen the
Cat
Brand mascots: Mickey Mouse
Brand logos: Nike Swoosh
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Type of Income
Income generated by social media influencers may be in monetary or non-monetary form. Monetary income includes payment received in methods such as management fees, consultant fees, talent fees or similar payments. Non-monetary income includes gifts, discount vouchers, free services or other benefits, which should be measured at their market value.
The common types of income include:
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Direct payments from social media platforms;
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Payment as a product ambassador on social media;
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Sale of goods, including both physical and digital products;
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Sales of social media accounts or user IDs with significant follower base;
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Royalties for the use of influencer’s character on social media;
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Other revenue receipts such as payments for serving as a judge or participant in entertainment shows or providing services as a trainer or facilitator.
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Scope of taxation and tax treatment
Income earned by social media influencers who is a resident in Malaysia is taxable in Malaysia if the activities generating the income are carried out in Malaysia, regardless of whether the payment is received from local or foreign sources. This includes income from social media platforms based outside Malaysia, such as YouTube or TikTok, as well as income from activities performed abroad but effectively carried out in Malaysia.
A.
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Individual influencers
Income received, whether in monetary or non-monetary form by an individual from any activity performed is taxable income under Section 4(a) of the ITA because the income is from exercising a profession. The income must be declared even if there is no contract agreement signed by the influencer.
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B.
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Object-based influencers
Object-based influencers have no connection with actual individuals in the real world and may consists of cartoon characters or fictional characters in films or dramas, caricatures, or logo / symbols of an organisation.
Typically, the owner of the object-based influencers opens and manages the account of the object. Income received by the object-based influencers is taxable under Section 4(a) of the ITA in the hands of the account owner, whether it is an individual or a company.
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Allowable Expenses
Social media influencers are eligible to claim tax deduction of expenses wholly and exclusively incurred in the production of gross income under Section 33(1) of the ITA. Expenses which are personal or capital in nature are disallowed under Section 39 of the ITA.
In addition, social media influencers may also claim capital allowance on qualifying capital expenditures incurred for business purposes, in accordance with Schedule 3 of the ITA.
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Conclusions
With the formalisation of the tax treatment for social media influencers in Malaysia, it is important for affected individuals to declare all income derived from social media influencing activities under Section 4(a) of the ITA.
Influencers who derive non-employment income are required to make payment of estimated tax instalment to the IRBM as well as maintain records and supporting documents relating to all income and expenses for seven years for audit purposes by the IRBM.
For further information, please visit the official website of the Inland Revenue Board of Malaysia at
https://www.hasil.gov.my/en
KAIZEN Group, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professional accountants in Kaizen for further clarification.
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