Guide to Crypto Taxation in Malaysia | Cryptocurrency | Bitcoin | Managing Your Money Series

The LHDN, Malaysia's tax authority, has at last issued their regulations regarding crypto taxes in Malaysia! Find out if your Bitcoin gains are protected from taxes or if they are at risk.

Malaysia's Current Crypto Situation

Cryptocurrency, often known as digital assets or crypto, is become more and more popular worldwide including in Malaysia. With an estimated RM21 billion in cryptocurrency assets, Malaysia ranks rather strongly in terms of crypto ownership, 20% more than the global average of 15%.

Whether cryptocurrency is taxable is a popular question from Malaysian cryptocurrency investors. Because cryptocurrency earnings would be greatly reduced if taxed, this is a crucial topic to ask. LHDN had previously responded to this query with the incredibly straightforward rule that cryptocurrency is not taxed as an investment but only if traded (trading in nature) (capital in nature).

As it turns out, LHDN has published more comprehensive instructions on the tax treatment of digital currency transactions as of August 26, 2022. Given that the paper is lengthy, allow us to highlight some of the most important sections.

"Digital currency" refers to any representation of value that is kept on a distributed ledger, whether it is cryptographically secured or not, and that can be used to credit or debit accounts as well as act as a medium of exchange.

A distributed ledger representation, whether or not it is cryptographically secured, is referred to as a "digital token."

Cryptocurrency: Is It Taxable?

Yes, it is Taxable :-

• Trading (continuous, systematic, active)
• Business or cryptocurrency mining
• Paid in cryptocurrency (deductible as business expenses)

Not Taxable :-

• Investing (occasional)
• Paying for products and services using cryptocurrency
• Free crypto splits and distribution

Maybe (It Depends)

Change one cryptocurrency for another (regardless of whether gains or losses are intrinsically financial).

What Qualifies as Trading?

LHDN bases its determination of what counts as a trade on eight different factors:

• large number
• short period of ownership
• often occurring transactions
• Work you did to increase the marketability and desirability of the cryptocurrency
• Not a forced situation (e.g. sudden need of cash; foreclosure)
• The motive is business
• Obtaining short-term financing to buy cryptocurrency
• Additional elements or documentation (e.g. feasibility study, documentation)

Crypto Taxation Frequently Asked Questions:

Does this mean I can pay my employees in cryptocurrency and receive my own pay?

A: In terms of an exchange medium, yes. (BMM nevertheless ruled that it is not legal tender.)

What happens if a cryptocurrency's value is unknown?

A: Apply the linked transaction's fair value.

Happy Investing! 😉

Reference:

https://www.freepik.com/free-photo/account-assets-audit-bank-bookkeeping-finance-concept_17431619.htm

https://phl.hasil.gov.my/pdf/pdfam/20211004_The_Malaysian_Reserve_The_Issues_Surrounding_Cryptocurrency_in_Malaysian_Taxation.pdf

https://themalaysianreserve.com/2021/01/05/active-cryptocurrency-traders-not-spared-from-lhdn/

https://ringgitplus.com/en/blog/income-tax/active-cryptocurrency-traders-are-required-to-declare-their-gains-for-income-tax.html