Overview of Malaysia’s Crypto Assets Taxation and Regulatory Framework

1. Overview of Malaysia’s Tax System

Malaysia implements a tax system that combines direct and indirect taxes. Direct taxes 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, executed by the Inland Revenue Board and the Royal Customs Department, which collect direct and indirect taxes respectively. The state government mainly collects local taxes such as land tax, mineral tax, and forest tax.

main types of taxes

1. Corporate Income Tax: The tax rate varies based on the type of company and income level, generally ranging from 15% to 24%.

2. Personal Income Tax: A progressive tax rate ranging from 0% to 30%.

3. Withholding Tax: For non-resident enterprises or individuals, the tax rate varies depending on the type of income, usually between 10% and 15%.

4. Real estate capital gains tax: The tax rate ranges from 5% to 30% depending on the length of time held.

5. Import and export taxes: Most imported goods are subject to import taxes, while some resource-based products are subject to export taxes.

2. Crypto Assets Tax Policy

the legal positioning of Crypto Assets

Malaysia does not recognize Crypto Assets as legal tender, but regards some Crypto Assets as “digital assets” and includes them under securities regulation. Tokens that have the nature of investment contracts are classified as security tokens, and their issuance and trading must be approved by the regulatory authorities.

tax treatment

Malaysia currently does not impose capital gains tax on individual holdings of Crypto Assets. However, if individuals or businesses engage in frequent Crypto Assets trading activities, they may be classified as “day traders,” and their earnings will be considered business income and subject to income tax.

The criteria for determining whether one is a day trader include factors such as the amount held, holding time, trading frequency, and trading motivation. Long-term holders who can prove that they do not intend to profit from trading may be exempt from taxation.

Taxation Method

For cryptocurrency transactions that require taxation, the calculation method for taxable gains is: the difference between the disposal price and the acquisition cost. When accepting cryptocurrency as payment, the taxable income should be recognized at the fair market value at the time of acquisition.

Expenses directly related to Crypto Assets trading, if recognized as expenditures for “risky business activities,” can be deducted before tax.

3. Evolution of Regulatory Frameworks

Malaysia’s Crypto Assets regulatory framework is centered around the Securities Commission (SC) and the Central Bank (BNM), forming a dual-track parallel regulatory system. The main development history is as follows:

• 2014: BNM declares that it does not recognize Crypto Assets as legal tender.

• 2018: BNM issued anti-money laundering guidelines requiring crypto assets service platforms to fulfill customer identity verification obligations.

• 2019: SC included some digital coins into the securities regulatory scope.

• 2020: SC released the “Digital Asset Guidelines” to regulate activities such as ICOs and exchange operations.

• 2021-2022: Strengthen law enforcement against unauthorized platforms, focusing on emerging asset forms such as DeFi and stablecoins.

• 2024: SC revises the “Digital Asset Guidelines” to further clarify the securities status of digital currencies and related regulatory requirements.

4. Future Outlook

Malaysia adopts a cautious approach to the regulation and taxation of Crypto Assets, gradually building a compliance framework. In the future, there may be an enhancement of cross-border data exchange, stablecoin regulation, and platform audit mechanisms, promoting the integration of Crypto Assets into the mainstream financial system. Digital tax compliance will also become a trend, expected to unleash the potential of the encryption economy on a controllable risk basis.