Sole Proprietor Tax in Malaysia: Filing Form B

By Axecta Management Services, Kuala Lumpur · Last verified: 29 October 2026

Who files Form B

A sole proprietorship is not a separate taxpayer. The business and the owner are the same person for income tax, so the profit of the business is added to the owner’s other income and taxed through the individual return. LHDN’s individual FAQ describes Form B as the return for a resident individual with business, employment and other income, and says that someone who started a business while already receiving employment income should file Form B covering both, before or on 30 June.

The practical test is simple. If you earn only a salary, you file Form BE, due earlier. If you carry on any business, even part-time or alongside a job, you file Form B. LHDN’s FAQ also says an individual who runs a business must register for a tax number even if the business makes a loss, so a business that loses money still has a filing relationship with LHDN.

Form B or Form BE

Source: LHDN’s Return Form Filing Programme for 2026.

Due dates and the grace period

The 2026 programme opens e-Filing for the 2025 year of assessment on 1 March 2026. It gives 30 June 2026 for Form B and a grace period of 15 days for e-Filing. Its worked example is useful: if a taxpayer files Form e-B on 16 July 2026, the return is considered late from 1 July 2026 and a penalty can be imposed under section 112(3) of the Income Tax Act. The grace period is a safety net that applies if you file within 15 days. After that, lateness counts from the original date. LHDN’s income declaration page also lists 15 July for online Form B and notes that online dates may change, so check the programme.

For next year, the same programme will be republished, so open the version for the year you are filing instead of relying on the date in this article.

Step by step: filing Form B on MyTax

1. Confirm you have a tax number. Register through e-Daftar if you have none. For an individual with business income LHDN’s page lists your identification and the business registration certificate as documents, and says to expect your reference number within 3 working days after completing the application.
2. Close the business year. Confirm your accounting year end (many owners use 31 December) and finish the books after it.
3. Prepare the accounts. Profit and loss account, with a schedule of sales, expenses and capital allowances.
4. Compute adjusted income. Add back non-deductible items, deduct allowable ones. See which expenses are deductible.
5. Log in to MyTax. If it is your first time and you have no digital certificate, LHDN’s page says the system will tell you none exists and you register one using e-CP55D (web) or e-KYC (face identification).
6. Complete Form e-B, including business particulars, adjusted income, capital allowances, other income and reliefs. Read the guide notes and explanatory notes for the form before filling in.
7. Submit and keep the acknowledgement.
8. Pay any balance by the due date. LHDN’s FAQ lists the ByrHasil online application and LHDN collection agents, and overseas transfer for those abroad, and says the information needed includes income tax number, year of assessment and payment code. It gives 084 or 095 as the individual payment code, so confirm which applies on the payment page.
9. Keep your records for seven years.

What to prepare

The business profit is calculated on the same principle used for companies: income less allowable expenses. Private spending is not a business expense. A personal grocery run paid from the business account is not deductible.

Illustrative example

This is an illustration with round numbers. An online seller (sole proprietor) has the following for the year ended 31 December 2025:

The owner also earned RM30,000 salary before starting the business. Form B adds the RM82,000 to the employment income, applies the reliefs the owner is entitled to, and arrives at chargeable income. We have not applied a tax rate because the individual rate table must be read from LHDN’s current pages for the year of assessment. The point of the example is the step that is often missed: the RM6,000 of private spending that was booked as a business cost must be added back, or the return is wrong and the penalty provisions for incorrect returns come into view.

Instalments and late payment

Some sole proprietors receive an instalment notice (CP500) from LHDN. LHDN’s FAQ says an appeal to amend the instalment must be made no later than 30 June, using Form CP502 with the notice. If you disagree with the amounts, do not wait.

On penalties, LHDN’s offences, fines and penalties page states:

• Not returning the income tax return form: section 112(1), a fine of RM200 to RM20,000 and/or imprisonment up to 6 months.
• Not reporting actual income, or giving incorrect information: section 113(1), a fine of RM1,000 to RM10,000 plus 200% of the tax undercharged.
• Paying an instalment more than 30 days after its due date: section 107B(3), 10% of the outstanding instalment.
• Late payment of tax on non-business income after 30 April: a 10% increase under section 103(3), with a further 5% if the tax and penalty remain unpaid after 60 days, according to the FAQ. For business income the page does not state the penalty, so confirm with LHDN.

Employees and Form E

LHDN’s programme says sole proprietorships without employees are exempted from submitting the CP8D. If you hire staff you file Form E by 31 March for the previous year and remit PCB monthly. See PCB/MTD and employer payroll obligations.

Other obligations that sit beside Form B

• E-invoicing: by turnover, not structure. Businesses below RM3,000,000 are exempt; the phases for larger businesses ran from 1 August 2024 to 1 January 2026. See e-invoice exemption.
• SST: if your taxable activity passes the Customs threshold. See who must register for SST.
• Business registration: the sole proprietorship’s SSM registration must be renewed; check SSM for the renewal rules.

Records

LHDN’s FAQ says records must be kept for seven years starting from the year the return is submitted, and supporting documents need not be submitted with the return. The FAQ also refers to section 119A for record-keeping failures, with fines of RM300 to RM10,000, imprisonment up to one year, or both. See tax record-keeping requirements.

Common mistakes

• Filing Form BE when you have business income. The business is then unreported.
• Mixing personal and business money. Use a separate account even though the law does not force it.
• Forgetting to add back private costs.
• Waiting for the grace period. It is not an extension.
• Ignoring a CP500 notice and missing the 30 June appeal date.
• Not registering for e-Daftar until the due date is near.
• Claiming capital allowances without an asset register.

When to consider a company

As profit, risk or contracts grow, a Sdn Bhd may suit better. A company is a separate taxpayer that files Form C, pays at company rates (for YA 2023 to 2024 LHDN’s company tax rate page lists 15%, 17% and 24% bands for qualifying small companies), and separates the owner’s personal assets from business debts, though banks may still ask for personal guarantees. It also brings SSM annual returns, a company secretary and audited or prepared accounts. Compare costs in sole proprietorship vs Sdn Bhd and cost of setting up a Sdn Bhd.

How Axecta helps

Axecta prepares the accounts, the tax computation and Form B, files through MyTax and tracks your instalment notices. When the time comes to move to a company, our incorporation team handles it. See our tax compliance and filing service.

Next steps

1. Check you have a tax number and MyTax access before March.
2. Close the books after year end and reconcile to bank statements.
3. Read the Form B guide notes for the year.
4. File before 30 June and pay any balance.
5. Store the return and records for seven years.

Frequently asked questions