Cryptocurrency Tax in Malaysia: LHDN Guidelines & Ops Token
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Recently, news broke that LHDN (Inland Revenue Board of Malaysia) will be carrying out "Ops Token" to identify companies or individuals involved in cryptocurrency trading so that they pay their taxes to LHDN.
You can refer to the news here: LHDN conducts special ops to curb tax leakage from cryptocurrency trading
Some people use digital cryptocurrency to run their businesses. Others use crypto purely as an investment.
There is a difference between how and why a person uses crypto and their obligation to pay tax. Certain activities, when done as an investment, are not subject to tax. This is because Malaysia currently does not have a Capital Gains Tax on the disposal of digital currency assets.
LHDN has indeed provided guidelines on the tax treatment of digital currency transactions. You can refer to these guidelines at GP_LAYANAN_CUKAI_KE_ATAS_TRANSAKSI_MATA_WANG_DIGITAL.pdf (hasil.gov.my)
One of the main topics in these guidelines is whether a digital currency transaction is considered a business activity.
For example, if you trade digital currencies between one another — buying and selling digital currencies for profit — then it will be subject to tax.
If a company or individual carries out mining activities, they will also be subject to tax.
If someone sells products or services and receives payment in the form of digital currency, the concept is the same as earning profit in Ringgit Malaysia — conducting business transactions in Ringgit — and it will similarly be subject to tax.
If an employer pays wages or salaries to employees using digital currency, that transaction can be recorded in the accounts and treated as an expense for the employer.
Employees who receive their salary in the form of digital currency also need to report that income or salary, and it will be subject to tax.
In the section related to investment, the guidelines explain that buying or selling digital currency as a long-term investment will not be subject to tax when the asset is disposed of. However, LHDN has established several factors to determine whether there is an element of trading in the activity.
These factors include:
Nevertheless, the assessment appears to be somewhat subjective — questions like how many transactions are considered "frequent"? How long must you hold an asset for it to be considered an "investment"?
Yes, if your crypto buying and selling activity is deemed as trading by LHDN based on factors such as transaction frequency, holding period, and transaction volume, the profit may be subject to income tax.
LHDN looks at several factors including transaction volume, the period between purchase and sale, transaction frequency, and whether there is additional effort to increase the asset''s value.
Ops Token is an operation by LHDN to identify companies or individuals involved in cryptocurrency trading so that they pay their due taxes to the government.
Yes, any income earned including from digital currency-related activities must be reported to LHDN to ensure proper tax compliance.
Understanding the tax regulations surrounding cryptocurrency is essential for every digital investor in Malaysia.
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