I have come across many forums discussing this issue. Obviously many bloggers and website owners want to know this and turn to the internet (where else) to find the answer.

There are many opinions given in the forums and discussions. However, many opinions given are based on different individuals’ understanding (or misunderstanding) of the Income Tax Act (ITA).

Simply answering 'YES' or 'NO' is not enough, we have to understand why and justifications for our answer. However, if you are not bothered about the details, then I can tell you that in my opinion, it is 'NO'.

Why? Let's look at the ITA.

Section 3 of the ITA reads:-
“........ a tax to be known as income tax shall be charged for each year of assessment upon the income of any person accruing in or derived from Malaysia or received in Malaysia from outside Malaysia.”

This implies that income from Google AdSense falls squarely under taxable income as it is clearly "income received in Malaysia from outside Malaysia".

HOWEVER, Para 28(1) of Schedule 6 of the ITA (tax exempt income) defines non-taxable income as:-
“..... income of any person other than from sources outside Malaysia and received in Malaysia."

Therefore, income from Google AdSense would have been taxable (as specified in Section 3), had it not been for Para 28(1) of Schedule 6 which clearly exempts it.


  1. If you sell stuff at ebay from Malaysia to a foreigner, would that income be taxable? Obviously it is taxable because you're doing your business in Malaysia, selling to foreigner. It doesn't mean that selling to a foreigner makes my income an outside source.

    Same thing as blogging. You're blogging from Malaysia, and it wouldn't be fair to say that income derives from outside Malaysia. You are, after all, typing your words using a keyboard and internet in Malaysia. Therefore, I still think that it is taxable, for most bloggers here in Malaysia.

  2. Thanks for the very interesting comment.

    I have also come across other opinions saying that it is taxable.

    The Malaysian IRB has thus far not issued any rulings on income from internet business. I guess it is rather difficult with the existing law because you may be blogging from any where in the world. I may be blogging from Malaysia today and tomorrow I may be in another country and blog from there.

    I am relying on the wordings in Para 28(1). It says "derived from sources outside Malaysia and received in Malaysia". If I received income from Google USA, it is "derived from sources outside Malaysia". It does not matter whether you are blogging in Malaysia or overseas.

    "Derived from" is not the same as "working from".

    If you sell things from e-bay, where is the source of income ? In my opinion, if you are doing your business in Malaysia, then the source of your income is from your "e-bay business" in Malaysia. It is different from Google Adsense.

  3. Well, from my understanding of the derive, it means obtained or or come from. Well, it's not taxable if you're defining it that way. However, if you are to rely on that definition, then my example of selling stuff to a foreigner would deduce that the source of income is derived from outside malaysia but received in malaysia, no? But then again, i do know of people paying taxes for selling stuff to foreigners via ebay.

    I can't see this Google Adsense income any different from the ebay example i gave. When you're blogging and you're getting income from advertisement, it's like a business already. I remember reading cases on hobbies turn money making business and becomes taxable.

  4. so basically you're saying google adsense income is not taxable but e-bay or lelong based income is, is that right?

    but looking at e-bay, the income (from ebay) can be derived from sources outside malaysia, so does that not exempt the tax?

    are we looking at the 'ebay' as the source of income or should we look at the business transaction itself individually as the source of income?

  5. I've been through this discussion with my lecturers and my seniors at work, and most of them come up with a conclusion that this kinda income is taxable. I too, used to argue on that clause of the Schedule 6 in the ITA. And my lecturer told me that the clause is there because there are people who works in foreign country, and they pay the foreign country tax, and when they remit this income back to malaysia, they have to pay tax again. To make it fair, they decide to add this clause to schedule 6. If i'm not wrong, foreign income remitted to malaysia used to be taxable.

  6. Like I said before, different people have different opinions. I can't say who is 100% right or wrong. Unless and until the IRB comes out with a specific ruling, the debate will go on.

    IMHO, eBay is only a platform for you to do business. You are actually carrying on a business in Malaysia using eBay as a marketing tool. Therefore, you are deriving income from your business in Malaysia. Your customers may be from overseas but your income is from a business source in Malaysia. Just like a factory exporting manufactured goods to overseas and get paid by its overseas customers. The 'money' comes from overseas but the 'source of income' is the business in Malaysia.

    Income from Adsense is completely different. It is not your business as you have no control over it. It cannot be said to be directly linked to your blogging. You just provide a space for advertisements.

    Imagine this. You stop blogging for 1 year but your blog is still there. People access your blog and click on advertisements there and you get paid.

    In another case, say you go holiday in Hong Kong for 1 month and bring along your laptop and start blogging from there.

    Can you differentiate which part of the income is from Malaysia and which is not ?

    In my opinion, the 'income source' in Adsense is the 'advertisements slotted in by Google, USA' and not in my laptop. Therefore, the 'source of income' is in USA and not Malaysia or any country that I blog in.

  7. GG, Income Tax laws should be intepreted as they are and not to go behind their wordings to try to guess why they are there. For explanation purposes in classes, yes, but once it is gazetted into law, we should follow its wordings strictly.

    Foreign income remitted into Malaysia used to be taxable. This was changed, if I am not mistaken, in the year 2000.

    The purpose is to encourage businesses which has invested overseas and made profits to bring in their profits into Malaysia. These profits may have been tax-exempted in the foreign countries (because of tax incentives, etc) but when they were remitted into Malaysia, they would be taxed. As these businesses brought capitals from Malaysia to invest in those countries, Malaysia suffered a lot in capital outflows but those profits were not remitted back to Malaysia. We are talking about hundreds of millions of Ringgit.

    It has nothing to do with paying tax in the foreign country. There's always unilateral reliefs and 'tax sparing reliefs' in DTAs to fall back on.

    For our discussion on Adsense, we should just look at the wordings of Sch 6 Para 28(1) and not why it was put there.

  8. Ah. Sorry for my absence. I was really busy with my work lately. Forgive my super noob knowledge in the ITA. Perhaps it was wrong for me to point to the interpretation of the law in Sch 6 Para 28(1). It was a losing point for me, hahaha.

    Let's go back to the argument where you say you could still travel around the globe, and you could be blogging around the globe, and yet it shouldn't be fair to say that your income is taxable.

    And I think it's not fair to say that we have no control over the Google Adsense income. If you provide no space, you get no income. If you provide space, you will get income, eventually. It is your business in Malaysia after all. If you go travelling and you blog outside Malaysia, then how do we justify that? Ok, what if I'm doing business in Malaysia, and I travel to say, Japan, and I manage to close a sale there. Would you say that sale is not taxable? Not fair isn't it? It's after all, for your business back in Malaysia. Same goes to blogging. You're not doing a permanent establishment there, so I wouldn't say that blog entry you write outside Malaysia is nothing related to what you're doing in your blog in Malaysia.

    If you're to say Google Adsense is not taxable, then I bet all those newspapers and magazine would be trying to get advertisement from foreign countries cos those income are not taxable at all! It is in compliance with Sch 6 Para 28(1).

  9. Hi GG,
    I would not go so far as whether being taxed is fair or not fair. If the ITA says it is taxable, then 'fairness' is irrelevant here.

    My intepretation goes back to the basic wordings of the provision, i.e. 'sources outside Malaysia'. The examples quoted by you, in my opinion, are quite different as their 'source' of income are different.

    If you do business in Malaysia and travel to Japan to get business, what is your 'source' ?

    I would say that your 'source' is still your business is Malaysia. You will bill your customers in Japan using your Malaysian company's name and invoices. If you stop doing business in Malaysia, you will lose your 'source' of income.

    If a local newspaper or magazine gets advertisement from say, a Japanese client, what is its 'source' ?

    The 'source' would surely be the newspaper or magazine publishing business in Malaysia, regardless of where the advertisements come from. If the newspaper or magazine loses its printing license in Malaysia, the 'source' will no longer be available.

    What, in your opinion, is the 'source' of Adsense income ?

  10. remember, tax act never fair.

    tax practitioner.

  11. Atta Hun,

    The ebay income is non-taxable IF "E-bay pays you."

    It's tax-able if "seller pays you".

    Since seller pays you directly, it's almost like seller purchase directly from Malaysia, therefore it's derived in Malaysia.

    IF for example, you list stuff on Amazon, seller pays amazon, then amazon in turn pays you, then it's non-taxable, I think.