Unlike a salaried employee, who has nowhere to hide from the taxman, corporations have the avenue of employing legal means to avoid or minimise tax by shifting earnings across the globe, capitalising on loopholes. That’s what Uber has been doing, and Uber drivers may soon have to pay taxes should the government fail to impose tax on Uber’s ride revenues, The Sun reports.
It adds that over the years, Uber’s tax planning has succeeded in dodging tax legally from governments around the world including Australia, Canada, Hungary, UK and US tax authorities. It was reported in the UK that Uber is legally avoiding tax by transferring its ride income to its sister company in Netherlands. Also, less than 2% of Uber’s total revenue would be subject to taxes by the US tax agency, according to reports.
According to Fortune magazine, Uber has created subsidiaries in every country it operates in as well as forming two subsidiaries in Netherlands – Uber International CV and Uber BV.
The subsidiaries in each country do not earn directly from the riders, but the fare is sent to Uber BV, as listed in your credit card statement. Uber typically sends back 80% of the ride payment back to the driver via another Dutch subsidiary and keeps 20% as revenue. The mag calls this “ocean income, because it sits in a gray area between national tax authorities.”
What’s a determined government to do? A government insider told The Sun that the registration drive for Uber and Grab drivers as part of the recently mooted “e-hailing” initiative would hold the key for taxation. “The drivers database will be important for monitoring, licensing fee and tax purposes,” the paper’s source said.
Contacted by the free daily, a senior officer of LHDN said the board could impose withholding tax on special classes of income to Uber Malaysia Sdn Bhd under Section 4A of the Act for transferring Uber fare revenues to non-residents.
Last June, Land Public Transport Commission (SPAD) chairman Tan Sri Syed Hamid Albar said Uber’s cashless payment system did not benefit the country. “The money goes out of the country and our ringgit does not circulate locally,” he said. Uber has recently started to accept cash for rides.
The move to legalise and regulate app-based ride hailing services such as Uber and Grab is on track. After receiving endorsement from the Special Economic Committee chaired by Prime Minister Datuk Seri Najib Abdul Razak last month, SPAD will table a paper to the Cabinet this month for final approval.
Uber/Grab aside, the “e-hailing” model also includes details to transform the taxi industry, public service vehicle (PSV) license requirement for private car drivers, annual vehicle inspections and comprehensive insurance coverage. More on the planned comprehensive revamp here.
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Driver must declare tax for their income la.
A few thousands income need to be taxed; RM2.6bil donation spent no need tax a single sen.
Welcome to Malaysia!
AP also no tax, remember?
Driver kena tax, then tambah service tax & GST dalam bill… siapa susah late??
If you want to tax the drivers fine, but I can assure you uber drivers are not making much anyway. If you factor in depreciation on motor vehicle drivers might even get tax breaks.
All it takes is a visit to a nearby LHDN branch, and they can help give tax advice for free. They can even give accounting advice too to help you know how to have good bookkeeping record practice.
They know, not everyone is an accountant, and most self employed like nasi lemak seller, hawker, cobbler, taxi driver, etc can’t really afford to hire tax agent, so LHDN can provide assistance for free.
Depreciation? Expense running the motor vehicle? The taxi driver can register himself as sole proprietorship, all those expenses can help reduce tax payable. The taxi driver only need to pay tax on net income after less expenses, deductions, rebates, etc. But most people don’t, and LHDN actually very kind to overlook this. They’d usually focus on bigger fishes, the corporate.
Anyway, LHDN won’t collect from u in advance like u imagine, unless they send love letter CP500 (sort of like PCB), which you can appeal if you want to protest. At times like this, having good bookkeeping record is your best defense.
bloody smart tax consultants
To be a responsible company, pay taxes. Fine, the tax dodging that Uber (and many multinationals) is doing is legal, but its irresponsible. Everyone should pay their fair share.
On foreign capital outflows, there’s no reason to avoid this. Obviously, if you are Malaysian and you invest in Zimbabwe, you would repatriate your profits right? So lets not be hypocritical. The main thing is to encourage investment and create jobs, repatriation of profits is a non-issue, as long as taxes are legitimately paid. That’s the Singapore model, and that’s why their GDP is higher than ours.
Aye. It’s nothing unusual to get Uber to pay tax.
Uber Netherlands, a non-resident, is collecting income from Malaysia, it’s no different than having foreign consultant providing service/expertise here. In both cases, by right, both will be subject to withholding tax.
They are just learning from the leaders of this country.
Didnt our Ministers comes out and state having funds relocated outside to Panama is OK?
If it is not profitable than don’t do it. The article is spot on in the sense that salaried employees are regularly paying taxes while these people arent. And if depreciation/not earning much is an issue, than welcome to the plight of taxi drivers.
While i do not fully support Malaysian taxi drivers, itsd obvious that Uber has an unfair advantage in terms of taxes/licenses etc. and when put on a level playing field, they might not be as favorable.
nowadays driving for ride-sharing companies are no more lucrative.
Australia, Canada, Hungary, UK and US kena dodged tax. MY pula kena bash.
money goes out. prevent uber getting out our money. thus a malaysian apps should be available for example made by SPAD themselves and total ban on uber should be done.
It’s the company Uber that should be taxed, not the drivers.
make it cash based , and nobody will know…once its based on CC,its very easy for taxmen to calculate ur ins and out n determine the tax to be paid , cash is very difficult to trace…
App will record it ur data, how many income u got & how many item been sell. Just Gov want to spend kind of time to track or not only.
Taxing more on the rakyat when a lot of these big shots are avoiding tax themselves and what are they even doing about the underground market?