Social Media Influencers: What You Need To Know About The New LHDN Rules And How They Affect You

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Social media influencing is now officially recognised as a taxable profession in Malaysia

The Inland Revenue Board (LHDN) has issued detailed guidelines clarifying how influencers' income, including platform payments, sponsorships, gifts, and even account sales, must be reported, regardless of whether it is received in cash or non-cash form.

LHDN defines social media influencers as individuals or entities with the power to influence users through their knowledge, expertise, or relationship with followers. This includes:

• Individual influencers such as politicians, artists, athletes, professionals, students, or housewives.
• Object-based influencers, including animated characters, cartoon figures, logos, or brand mascots registered on social media.

Influencers can earn money through a wide range of activities, all of which may be taxable

Direct payments from social media platforms form one of the primary income streams. These include earnings based on clicks, views, follower counts, advertisements displayed on their accounts, or subscription commissions.

Another major source of income comes from companies that hire influencers as product ambassadors or to provide paid reviews. Payments for such services can be in cash or in-kind, such as free products, vouchers, discounts, or other benefits.

Similarly, influencers who sell their own branded goods or offer services online, ranging from physical merchandise to digital products like e-books, online courses, or training programmes, must also declare these earnings.

Income can also come from the sale of influencer accounts or social media IDs, particularly when these accounts have a large following.

Additionally, royalties paid for the use of an influencer's image, character, or intellectual property, such as animated characters or brand mascots, are taxable.

Finally, other payments received for professional activities, including speaking engagements, participation in training programs, serving as a judge in competitions, or attending events such as openings or fashion shows, also fall under taxable income.

Notably, these payments are taxable regardless of whether they are received in cash or in-kind, emphasising that even gifts, vouchers, and free services are considered part of an influencer's professional earnings.

For example, an investment influencer earned RM600,000 from YouTube in 2024, plus RM90,000 in seminar speaker fees and RM30,000 in participant profit shares. All of these are taxable.

Even if the platform operator is overseas, income is deemed derived from Malaysia if the influencer performs their activities while in Malaysia

For example, if an influencer received RM220,000 from Google Adsense Singapore for YouTube videos, the income is still taxable in Malaysia because the videos were created and uploaded locally.

Gifts, vouchers, free products, discounts, or services received in exchange for influencer activities are considered taxable income, even without a signed contract.

If an influencer earns RM220,000 for promoting sports equipment on social media, plus RM350,000 from sponsorships and social media platform payouts, all of it is taxable, whether in cash or in-kind.

However, influencers are allowed to claim expenses that are wholly and exclusively incurred to generate their income

This includes costs such as Internet access fees, video production and editing, and any other expenses directly related to creating and publishing content on social media.

According to LHDN, these are considered necessary for the business of influencing and can be deducted when calculating taxable income.

However, personal or capital expenses cannot be claimed.

For example, personal gadgets or home renovations unrelated to content creation would not qualify for deductions.

In addition, influencers may also claim capital allowances on capital expenditures, such as professional equipment or software, as long as the conditions under Schedule 3 of the Income Tax Act are met.

The key principle is that only expenses essential and directly connected to earning income as an influencer are deductible. Keeping detailed records of these expenses is crucial, both for accurate tax reporting and to ensure compliance if audited by LHDN.

According to the tax department, influencers must keep records of all income and expenses for seven years and pay estimated tax instalments under CP500 based on prior-year earnings.

They should also include all non-employment income when filing taxes, as employment income is handled separately via Scheduled Tax Deductions (STD).

What steps should influencers take?

Under these rules, for social media influencers, treating online activities as a professional business is essential. All sources of income, including payments from foreign platforms, sponsorships, gifts, or in-kind rewards, must be declared to LHDN, even if there is no formal contract.

Maintaining detailed records of content production costs, sponsorship agreements, and any gifts or perks received is critical for accurate reporting and potential audits.

Influencers should also keep track of allowable expenses, ensuring that only costs directly related to generating income, such as Internet fees or content creation expenses, are claimed.

For those earning from multiple platforms or countries, seeking professional tax advice can help navigate complex reporting rules and ensure compliance.

Ultimately, understanding that every online activity with financial value has tax implications will help influencers avoid penalties and manage their finances more effectively.