In a recent list of top 10 crypto tax-free countries, Malaysia was ranked #5. Even though crypto taxes in Malaysia, for the most part, are non-existent, there are some exceptions.
You’re liable to income tax rates in Malaysia if you day trade crypto or receive crypto as income.
This might come as a surprise to many, as people often think Malaysia has no taxes on crypto whatsoever. Nonetheless, in the guide, you’ll learn how crypto is taxed in Malaysia, how to calculate and report your taxes and possibly save some.
How Does the Ireland Revenue Board of Malaysia (LHDN) View Cryptocurrency?
Before anything, first, we must understand how the Ireland Revenue Board of Malaysia (LHDN) views crypto and Malaysia’s stance on crypto.
As of now, the LHDN doesn’t view crypto as property, asset or legal tender. However, it may receive the same tax treatment as stocks and shares under appropriate conditions.
How is Crypto Taxed in Malaysia?
Crypto taxes in Malaysia are mostly tax-free because Malaysia doesn’t have any capital gain taxes. So, selling or spending crypto doesn’t attract any taxes. But as we said, that doesn’t mean all your crypto transactions are free of tax consequences.
If you’re actively trading crypto, or if your activities unintentionally qualify you as a day trader, you’ll be liable to income taxes. Income tax rates in Malaysia range from 3% to 30%, depending on your income bracket.
If any of the following is true for your crypto activities, you’ll qualify as a day trader:
- Large quantity
- Short ownership duration
- High-frequency transactions
- Work done (by you) to make the crypto more desirable in the marketable
- Not sold under forced circumstance (e.g., sudden need of cash; foreclosure)
- Business as motive
- Getting short-term financing to purchase crypto
- Other factors/documentation
Since Malaysia has no capital gain taxes, the LHDN will try to put you in the day trader category, even if you’re not. But if you have evidence to prove you’re not a trader and only HODLing your crypto assets, you won’t be taxed.
Though you can do it yourself, having a crypto tax calculator like Bitcoin.Tax can help you extract all your transaction history from different wallets and exchanges faster and more efficiently. You can then use the transaction history as evidence.
Other than that, you’ll also pay income tax rates on crypto received as income. Whether you receive your income in fiat currency or cryptocurrency doesn’t matter. It’s still taxable income. So, naturally, you can also deduct your business expenses too.
How to Calculate Crypto Taxes in Malaysia
You only need to calculate your crypto taxes in Malaysia if you’re a day trader. And doing that is pretty simple. Just subtract the cost basis (acquisition cost) of your crypto from its selling price to calculate the gain.
As for getting paid in crypto, you pay income tax rates on the fair market value of your received crypto (at the time of acquisition).
So, if you receive 5 BTC on July 5 and at the time of receiving it, Bitcoin was trading for RM7000. You’ll pay income tax rates on RM35,000.
Crypto Taxable Events
The following are the only few taxable events in Malaysia involving crypto.
Getting Paid in Crypto
Getting paid in crypto is seen as the same as getting paid in any other fiat currency. Hence, income received in crypto is taxed under income taxes.
Mining rewards from crypto mining are also seen as income. Therefore, it will receive the same tax treatment as getting paid in crypto.
Staking or Lending Rewards
Staking or lending rewards also receive the same tax treatment as the above two transactions – income tax rates.
Tax-Free Crypto Transactions
The following are all the crypto transactions that have no tax consequences.
How to Avoid Crypto Taxes in Malaysia
Why would you wanna avoid crypto taxes in Malaysia, right? It’s already tax-free. But, of course, not for day traders.
Firstly, a word of caution – don’t try to trick the LHDN and avoid your taxes completely. If you get caught, which you probably will, you may face hefty penalties and even jail, as it’s a criminal offense not to pay your taxes.
But legally, your best tool to reduce your tax bill is to deduct business expenses. Also, instead of trading crypto for fiat currency, you should trade it for stablecoins, as that’s a more common practice to avoid tax complications among traders.
How to Report Crypto Taxes in Malaysia
The financial tax year in Malaysia runs from January 1 to December 31.
If you have earned any amount day trading crypto or receive your salary in crypto, you must file your income tax return before April 30. You can do that through the online portal of e-Daftar.