Cryptocurrency Tax in Malaysia: Essential Rules & Compliance Guide for Crypto Investors

Malaysia’s become something of a hotspot for crypto investors, thanks to its pretty relaxed tax approach. Unlike a lot of places, there’s no capital gains tax on crypto investments here, which definitely draws in traders from all over. Still, if you’re dabbling in crypto, you’ll want to know exactly when your activities cross into taxable territory.

In Malaysia, profits from crypto are usually tax-free if you’re just an occasional investor. But if you’re trading a lot or running a crypto-related business, those earnings get taxed as income. The difference really comes down to whether you’re investing or operating a business. The Inland Revenue Board of Malaysia (IRBM) uses a few tests to figure out if your crypto trading counts as business income.

With around 20% of Malaysians owning crypto now, tax compliance is more important than ever. The government’s laid out clear guidelines through the IRBM and Securities Commission, so you’re not left guessing about your responsibilities. Malaysia’s still considered crypto-friendly, but you can’t skip good record-keeping and a basic understanding of the rules.

Key Takeaways

• Malaysia doesn’t tax casual crypto investments, but frequent trading is business income and gets taxed

  
  

• Investors need to keep good records and declare any business income from crypto in their yearly tax returns

  
  

• Licensed exchanges and sticking to anti-money laundering rules are a must for legal crypto activity

How Cryptocurrency Taxation Works in Malaysia

Malaysia handles crypto income using its existing tax laws. The IRBM decides if your activity is business or investment, and that decision really affects your taxes.

Overview of Tax Treatment for Digital Currencies

The IRBM doesn’t see crypto as legal tender, but it does treat it as a taxable asset under the Income Tax Act 1967. Coins like Bitcoin and Ethereum are covered by securities laws if you trade them on licensed platforms.

Right now, the tax setup looks like this:

• Business income tax for frequent traders

  
  

• No capital gains tax on one-off or occasional crypto sales

  
  

• 8% service tax on crypto exchange services

  
  

• Withholding tax for cross-border crypto services

If you’re just holding crypto as an individual, you won’t pay capital gains tax when you sell. That’s a big reason Malaysia appeals to investors.

But if you run a company that deals in crypto—like mining, exchanges, or other business—you’re looking at a 24% corporate tax on profits.

Foreign crypto service providers working with Malaysians have to pay service tax too, so everyone’s on a level playing field.

Distinction Between Investor and Trader Tax Status

The IRBM uses what’s called the "badges of trade" test to decide if you’re running a business or just investing. This test is a big deal for your taxes.

If you’re a trader, you probably:

• Buy and sell crypto a lot

  
  

• Hold coins for short periods

  
  

• Trade systematically

  
  

• Are out to make a profit with regular transactions

Traders pay income tax on all their profits, but they can also deduct business expenses like platform fees and gear.

Investors, on the other hand, usually:

• Hold onto crypto for the long haul

  
  

• Trade infrequently

  
  

• Focus on keeping their capital safe

  
  

• Take a more hands-off approach

Investors don’t usually pay tax on gains from occasional sales. But the IRBM checks each situation, so it’s not always black and white.

How often and why you trade matters a lot. If you’re a pro trader, you’ll probably need to register your business and keep proper accounts.

Income Tax Act 1967 and Inland Revenue Board of Malaysia Guidelines

The Income Tax Act 1967 sets the ground rules for taxing crypto in Malaysia. The IRBM just applies the existing law to digital assets—there’s no special crypto tax law yet.

Some key sections:

• Section 4: General income tax

  
  

• Section 138: Taxpayer info confidentiality

Definitions for business income

The Securities Commission works with the IRBM to regulate exchanges and make sure everyone’s playing by the rules. Licensed exchanges have to report anything suspicious and keep transaction records.

You’ll need to declare crypto income on your annual tax return in the right category. If you’re trading as a business, that’s "Business Income." If it’s just occasional, it might go under "Other Income."

The IRBM wants to see detailed records—what you bought, what you sold, when, for how much, and who was involved. If you ever get audited, these records can save you a lot of headaches.

The government’s still refining its approach as more Malaysians get into crypto, but for now, they’re pushing for voluntary compliance and honest reporting.

Taxable and Non-Taxable Cryptocurrency Activities

Crypto gets taxed differently depending on whether you’re making business income or just capital gains. Trading and mining usually get taxed, but long-term holding is still capital gains tax-free.

What Qualifies as Taxable Income from Cryptocurrencies

The Income Tax Act 1967 applies if your crypto activity has those "badges of trade." These help the IRBM figure out if your transactions are taxable.

Taxable activities include:

• Trading crypto daily or weekly

  
  

• Running a mining operation for profit

  
  

• Operating a crypto exchange

  
  

• Accepting crypto as payment for work or services

  
  

• Regularly creating and selling NFTs

  
  

The badges of trade look at things like how often you trade, whether you’re using loans, how much work you’re putting in, and if you treat your coins like stock inventory.

When you convert crypto to Malaysian ringgit, use the market rate on the day of the transaction. All business-related crypto earnings get taxed at normal rates.

Using foreign exchanges doesn’t get you off the hook. If you’re a Malaysian resident, you’re still responsible for taxes here.

Capital Gains, Airdrops, Staking, and Mining

There’s no capital gains tax on crypto held as an investment in Malaysia. So if you’re just holding for the long term, you’re in the clear tax-wise.

Not taxable:

• Buying and holding Bitcoin for years

  
  

• Getting airdrops but not trading them

  
  

• Collecting NFTs casually and selling them later

Taxable: Mining rewards count as business income when you receive them. Staking rewards are taxable if you’re doing it as a business, but not for the occasional hobbyist.

Hard forks usually don’t get taxed right away. What matters is what you do with the new coins later.

Airdrops:

If you get free tokens, you don’t pay tax just for receiving them. But if you sell those airdropped coins as part of your trading, that’s taxable.

FIFO Method:

Most people use first-in, first-out accounting to figure out profits and costs. It’s the easiest way to track multiple buys and sells.

Crypto from games or reward programs? If you use it for business, it’s taxable. If it’s just personal use, you’re fine.

Records, Reporting, and Anti-Money Laundering Regulations

Good documentation is your best friend when it comes to taxes. The IRBM expects you to keep records for seven years.

What you’ll need:

• Dates and amounts of every transaction

  
  

• Ringgit values at each transaction time

  
  

• Wallet addresses and exchange statements

  
  

• Why and how often you traded

  
  

• Mining costs and electricity bills

Reporting:

Individuals report business crypto income on Form B. Companies use Form C, treating crypto revenue like any other business income.

You can write off exchange fees, mining costs, and transaction fees. But you can’t deduct personal purchases or speculative losses.

Anti-Money Laundering:

Licensed exchanges follow AML rules, and you should keep a clear paper trail showing where your funds came from.

Service Tax:

Crypto trading platforms might charge you service tax, whether they’re local or foreign.

It helps to use separate wallets for investments and trading. Mixing them up can complicate things if the IRBM ever checks your records.

Frequently Asked Questions (FAQs)

Malaysian crypto tax is really about business activities, not casual holding. Trading, mining, and staking profits get taxed; long-term holders don’t pay capital gains tax.

What are the requirements for reporting cryptocurrency gains on Malaysian tax returns?

If your crypto activity is business-like—regular trading, mining, or staking for profit—you need to report those gains. That’s under Section 4 of the Income Tax Act 1967. The business should be based in Malaysia or have a real presence here.

If you’re just buying and holding, you don’t have to report gains. There’s no capital gains tax on investments you’re just sitting on.

How are cryptocurrencies classified for tax purposes in Malaysia?

Malaysia calls digital currencies commodities, not legal tender. So, they fall under business income rules if you’re using them commercially.

The IRBM looks at why and how often you trade. Regular trading means business income; occasional transactions might not be taxed.

Mining and staking are always business income. Exchanges and other crypto businesses get taxed like any other company.

What is the tax rate applied to cryptocurrency trading profits in Malaysia?

Trading profits are taxed at Malaysia’s standard income tax rates—anywhere from 3% to 30%, depending on your total income.

If you’re a tax resident, you pay according to the progressive scale. The more you make, the higher your rate.

Non-residents might have different obligations, and where your business is based can also affect your rate.

Are there any specific forms or documentations required to disclose cryptocurrency holdings in Malaysia for tax purposes?

Traders should keep detailed records—dates, amounts, and reasons for every trade. You’ll use the same business income forms as with any other business.

Keep your trading records, mining receipts, and staking reward statements handy. Exchange transaction histories are your main backup.

The IRBM expects the same documentation as for any commodity business. There aren’t any special crypto-only forms—just the standard ones.

Can cryptocurrency losses be deducted against other types of income in Malaysia?

If you’re running a crypto business, you can usually offset business losses against other business income, under the usual rules.

You can carry forward losses if you’re a trader, but casual investors can’t claim losses—they’re not taxed in the first place.

You can only deduct losses when your crypto activity qualifies as business income. And, as always, good documentation is key if you want to make a claim.

Does Malaysia offer any special tax schemes or incentives for cryptocurrency investors?

Malaysia doesn’t roll out any unique tax breaks just for crypto investors or traders. If you’re running a crypto-related business, you’ll deal with the usual business tax rules—nothing fancy or out of the ordinary there.

Interestingly, since there’s no capital gains tax, long-term crypto holders already get a bit of a break. That alone makes things pretty attractive for folks who prefer to hold onto their assets.

Since 2020, digital service providers have had to handle service tax obligations. So, crypto exchanges—whether they’re local or from abroad—serving Malaysians need to make sure they’re following those rules.