Crypto Taxation in Malaysia: A Complete Guide

Malaysia is one of the countries experiencing an increase in ownership of cryptocurrency with about 20% of the people trading in digital asset investments. With more and more crypto becoming part of the financial system, local tax obligations are critical to understand. The Inland Revenue Board of Malaysia manages all aspects of crypto taxation as their governing organization. Understanding crypto tax rules protects people and organizations from facing troubles when they fail to report accurately or label their crypto activities correctly.

Tax Authorities & Regulations

Cryptocurrencies fall under Inland Revenue Board Malaysia (IRBM or LHDN) management through the Income Tax Act 1967 (ITA). The government regulates cryptocurrencies only as possession items and not as official money. IRBM relies on a “badges of trade” framework to figure out whether crypto activities are investment (non-taxable) or trading (taxable). Cryptocurrencies are not considered as currency by Bank Negara Malaysia and the Securities Commission Malaysia but as investment assets. As of now, there are no crypto-specific tax laws but general tax principles continue to apply to crypto transactions.

Types of Crypto Taxes in Malaysia

• Capital Gains Tax (CGT): Not applicable. Long-term investments in crypto are tax-free.
• Income Tax: Applies to active trading, mining, staking, airdrops, and receiving crypto as income or payment.
• GST/VAT: Malaysia does not currently impose GST or VAT on crypto transactions.
• Other Taxes: No wealth tax or inheritance tax applies to cryptocurrency assets.

Tax Rates & Brackets

• Capital gains: No capital gains tax on crypto investments.
• Individual income tax:
  • 0% for income up to RM5,000
  • 1% for RM5,001–RM20,000
  • 3% for RM20,001–RM35,000
  • 8% for RM35,001–RM50,000
  • 14% for RM50,001–RM70,000
  • 21% for RM70,001–RM100,000
  • 24% for RM100,001–RM250,000
  • 24.5% for RM250,001–RM400,000
  • 25% for RM400,001–RM600,000
  • 26% for RM600,001–RM1,000,000
  • 28% for income above RM1,000,000
    
• Corporate income tax:
  • 24% for companies with capital ≥ RM2.5 million
  • 15% or 17% for small businesses with capital ≤ RM2.5 million and income ≤ RM50 million

Crypto Transactions & Tax Treatment

• Buying and selling crypto: Taxable only if considered trading.
• Crypto mining and staking: Profits are taxed as income.
• Receiving crypto as salary or payment: Taxed based on market value.
• Crypto-to-crypto trades: Taxable if they are part of trading activities.
• DeFi activities, lending, and yield farming: Usually taxable as income.
• NFT transactions: Taxable if trading is frequent and profit-driven.

Crypto Tax Reporting & Compliance

Individuals and businesses must report crypto earnings as either personal or business income.

• File taxes using standard LHDN forms via e-Daftar.
• Report crypto income under “other income” for individuals.
• Maintain complete records including transaction logs, wallet addresses, invoices, and KYC documents for 7 years.
• Personal income tax returns are due by April 30, while business income is due by June 30.
• Penalties for failure to file or underreporting include fines and imprisonment.

Tax Deductions & Exemptions

Crypto trading losses can only offset profits from trading, not other income types. Capital losses from investments are not deductible, as capital gains are not taxed. For businesses, allowable deductions include expenses directly incurred for generating income, like trading fees and platform costs. General business tax incentives may apply if criteria under the ITA are met.

Enforcement & Penalties for Non-Compliance

The IRBM monitors crypto activity through data-sharing with licensed exchanges like Luno, MX Global, Tokenize Technology, and SINEGY. It also uses blockchain analytics tools to trace wallet addresses and transaction history. In 2020, Luno’s account was frozen during a tax investigation, reflecting the seriousness of enforcement.
Non-compliance may lead to:

• Fines
• Additional taxes and interest
• Criminal charges for tax evasion
• Imprisonment in severe cases

The taxpayer has to keep adequate and correct records. Not doing so could trigger audits, investigations, as well as legal action. The IRBM may at any time request proof of transactions.

Future of Crypto Taxation in Malaysia

Malaysia’s tax system for crypto is still evolving. While it currently offers favorable treatment for long-term investors, the IRBM may introduce clearer rules or new tax measures. While the government is open to digital innovation and blockchain, they are also slowly becoming stricter with reporting requirements and new obligations for both individuals and businesses.

Conclusion

The taxation in Malaysia is focused on the earnings from trading, mining, or staking of crypto, which are taxable as income, while capital gains from crypto are tax-free. It is important to keep records and report in a timely manner. Compliance is a way for taxpayers who want to stay on the right side of LHDN’s regulations and be granted safe by legal risks. Seeking professional advice in order to catch up with crypto tax obligation changes in policy might be favorable.

Frequently Asked Questions (FAQs)

1. Is cryptocurrency taxed in Malaysia?

 Yes, but only if it’s trading income, mining income, or staking income.

2. What is the crypto income tax rate?

The range for individuals is 0 to 28% for individuals, and 15 to 24% for businesses.

3. Do crypto investments need to pay capital gains tax?

No, crypto long-term investment gains are not taxed.

4. Do I need to report the crypto I receive as a gift?

Gifts are not taxed unless sold or used for income generation.

5. What happens if I do not report crypto income?

You may face penalties, audits, additional taxes, or even criminal charges

6. Are airdrops taxed?

They are not taxed at the time of receipt but are taxed if sold for profit.

7. Can I offset crypto losses?

Only trading losses can offset trading profits—not other income.