Overview of Cryptocurrency Taxation and Regulation in Malaysia

1. Overview of the Malaysian Tax System

Malaysia's tax system includes two main categories: direct taxes and indirect taxes. Direct taxes cover income tax, real property gains tax, and petroleum income tax, among others; while indirect taxes include domestic taxes, customs duties, import and export taxes, sales tax, service tax, and stamp duty. The country implements a federal and local tax-sharing system, with the federal government leading the formulation of national tax policies, executed by the Inland Revenue Board and the Royal Customs Department for direct and indirect tax matters, respectively. Local governments are responsible for collecting local taxes such as land tax and mineral tax.

2. Introduction to Main Tax Types

1. Corporate Income Tax: Depending on the company's registered capital and nature, the tax rate fluctuates between 15% and 24%.

2. Individual Income Tax: Residents are subject to a progressive tax rate of 0%-30%, while non-residents have a fixed tax rate of 30%.

3. Withholding Tax: A tax rate ranging from 3% to 15% is levied on non-local entities based on the type of income.

4. Real Estate Profit Tax: The tax rate decreases from 30% to 5% based on the holding period.

5. Import and Export Tax: The import tax rate varies depending on the goods and trade agreements, while the export tax mainly targets resource products, with a rate ranging from 0-20%.

3. The Legal Positioning and Tax Treatment of Crypto Assets

Malaysia does not regard Crypto Assets as legal tender, but the Securities Commission has included certain Crypto Assets under the category of "digital assets," which are regulated by securities laws. Currently, the country has not imposed capital gains tax on individuals holding Crypto Assets, but frequent traders may be classified as "day traders" and may be liable for personal income tax.

The criteria for determining "day traders" include: large holdings, short holding periods, frequent trading, intention to enhance market attractiveness, non-forced selling, commercial trading motives, and obtaining short-term financing.

For cryptocurrency gains recognized as day trading, the tax calculation method is the difference between the disposal price and the cost basis. Individuals or businesses accepting cryptocurrency as payment must report income tax based on the market value at the time of receipt.

4. The Evolution of Regulatory Frameworks

Malaysia's Crypto Assets regulatory framework is gradually improving with the Securities Commission (SC) and the Central Bank (BNM) at its core.

• 2014: BNM declared that it does not recognize Crypto Assets as legal tender.
• 2018: BNM issued anti-money laundering guidelines, bringing crypto assets service providers under regulation.
• 2019: The SC included some digital assets in the scope of securities regulation.
• 2020: SC released the "Digital Asset Guidelines", detailing requirements for ICOs, exchange operations, and more.
• 2021-2022: Strengthen law enforcement against unauthorized platforms, focusing on emerging forms of digital assets.
• 2024: SC updates the "Digital Asset Guidelines" to further clarify the securities attributes of digital currencies and related regulatory requirements.

5. Future Outlook

Malaysia adopts a cautious and gradual regulatory strategy in the crypto assets field, striving to balance encouraging innovation and preventing risks. As the market continues to mature, it is expected that compliance requirements will be further refined in the future, regional regulatory cooperation will be strengthened, and the exploration of integrating the crypto economy more deeply into the mainstream financial system will take place.