Malaysia’s tax authorities (LHDN) has finally released their guidelines to crypto taxation in Malaysia! Gain insight on whether your Bitcoin is tax free or are your gains at risk.

The State of Crypto in Malaysia

Digital assets aka cryptocurrency aka crypto is increasingly popular globally and in Malaysia. Crypto ownership in Malaysia ranks pretty highly at 20% above the global average of 15% with an estimated RM21b in crypto assets.

A common question Malaysians crypo investors ask is if crypto is taxable? This is an important question to ask as crypto gains would be significantly reduced if taxed. To this question, LHDN had previously provided a extremely simple guideline that crypto is taxable only if traded (trading in nature), but not as an investment (capital in nature).

As it turns out, as of Aug 26, 2022, LHDN has released more detailed guidelines on Tax Treatment of Digital Currency Transactions. It’s quite a long document, thus let us share some of the most relevant parts of the guidelines.

“Digital currency” means a representation of value which is recorded on a distributed ledger whether cryptographically-secured or otherwise, that functions as a medium of exchange and is interchangeable with any money, including the crediting or debiting of an account.

“Digital token” means a representation which is recorded on a distributed ledger whether cryptographcally-secured or otherwise.

 

Crypto: Taxable or Not?

Taxable!

  • Trading (continuous, systematic, active)
  • Business or mining crypto
  • Salary paid in crypto (deductible as business expenses)

Not Taxable!

  • Investing (occasional)
  • Buying crypto to pay for goods & services
  • Free crypto distribution / splits

Maybe (It Depends)

  • Exchange crypto for another (whether gains/losses are capital/revenue by nature)

What is Considered Trading?

There are 8 areas of considerations used by LHDN to determine what constitutes a trade:

  1. Large quantity
  2. Short ownership duration
  3. High frequency transactions
  4. Work done (by you) to make the crypto more desirable / marketable
  5. Not forced circumstance (e.g. sudden need of cash; foreclosure)
  6. Business as motive
  7. Getting short term financing to purchase crypto
  8. Other factors / documentation (e.g. feasibility study, documentation)

FAQ on Crypto Taxation

Q: Does this mean I can pay my employees / receive my pay in crypto?

A: Yes, as a medium of exchange. (It’s still not legal tender as ruled by BMM).

Q: What if a crypto has no published value?

A: Use the fair value of the related transaction.

 

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