Overview of Cryptocurrency Taxation and Regulatory Framework in Malaysia

1. Introduction to the Malaysian Tax System

Malaysia implements a tax system that operates both direct and indirect taxes in parallel. Direct taxes mainly include income tax, real property gains tax, and petroleum income tax; indirect taxes cover domestic taxes, customs duties, import and export taxes, sales tax, service tax, and stamp duty. The federal government is responsible for formulating national tax policies, while the Inland Revenue Board and the Royal Customs Department are respectively responsible for the collection of direct and indirect taxes. State governments mainly levy local taxes such as land tax, mineral tax, and forest tax.

2. Overview of Major Taxes

2.1 Corporate Income Tax

Companies registered in Malaysia are required to pay income tax on their global income. The tax rate varies based on the company's paid-up capital and income level, generally ranging from 15% to 24%.

2.2 Personal Income Tax

Residents are required to pay income tax on their income earned both within and outside of Malaysia, with a progressive tax rate ranging from 0% to 30%. Non-residents, on the other hand, are subject to a fixed tax rate of 30%.

2.3 Withholding Tax

For non-resident companies or individuals, Malaysia imposes withholding tax on certain types of income, such as technical service fees, interest, and contract fees, with rates generally ranging from 10% to 15%.

2.4 Real Estate Profit Tax

Profits from the sale of real estate are subject to real estate profit tax, with the tax rate decreasing gradually from 30% to 5% as the holding time extends.

2.5 Import and Export Tax

Most imported goods are subject to import duties, with rates varying by product category and country of origin. Some resource-based products exported are subject to export duties ranging from 0% to 20%.

3. Crypto Assets Tax Policy

3.1 Legal Positioning of Crypto Assets

Malaysia does not recognize Crypto Assets as legal tender, but considers some Crypto Assets as "digital assets" and includes them under securities regulation.

3.2 Crypto Assets Trading Tax Principles

Malaysia currently does not impose capital gains tax on individuals holding crypto assets. However, if individuals or businesses engage in frequent crypto assets trading activities, their profits may be regarded as business income and subject to income tax.

3.3 Criteria for Identifying "Day Traders"

Tax authorities may classify taxpayers as "day traders" based on the following factors:

1. Hold a large amount of Crypto Assets
2. Short holding period
3. High trading frequency
4. Additional processing or promotion of Crypto Assets
5. The motivation for the transaction is clearly for commercial purposes.
6. Obtain short-term financing to purchase Crypto Assets
7. Other relevant evidence

3.4 Taxation Method

For cryptocurrency transactions identified as taxable, the method for calculating taxable gains is: the disposal price minus the acquisition cost difference. Income received in the form of cryptocurrency should be recognized as taxable income at its fair market value at that time.

4. Evolution of Crypto Assets Regulatory Framework

Malaysia is gradually establishing a dual-track regulatory system centered around the Securities Commission (SC) and the Central Bank (BNM).

• 2014: BNM declares that it does not recognize Crypto Assets as legal tender.
• 2018: BNM issued anti-money laundering guidelines, incorporating Crypto Assets service providers into regulation.
• 2019: SC included some Crypto Assets in the scope of securities regulation.
• 2020: SC issued "Digital Asset Guidelines" to regulate ICO and trading platform operations.
• 2021-2022: Strengthen law enforcement against unauthorized platforms, focusing on emerging forms of digital assets.
• 2024: SC updates the "Digital Assets Guidelines" to further clarify the securities attributes of digital currency.

5. Future Outlook

Malaysia adopts a prudent and gradual approach to Crypto Assets regulation, emphasizing financial stability and investor protection. In the future, it may further improve its compliance framework, strengthen regional regulatory cooperation, and explore innovative applications such as CBDC. With the promotion of international standards, Malaysia is expected to gradually unleash the potential of the encryption economy under the premise of controllable risks, promoting the integration of Crypto Assets into the mainstream financial system.