Overview of Malaysia's Crypto Assets Taxation and Regulatory System

1. Introduction to Malaysia's Taxation System

Malaysia's tax system includes two main categories: direct taxes and indirect taxes. Direct taxes encompass income tax, property gains tax, and petroleum income tax; 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, and the Inland Revenue Board and the Royal Customs Department responsible for the collection of direct and indirect taxes respectively. State governments primarily collect local taxes such as land tax and mineral tax.

Overview of Major Tax Types

1. Corporate Income Tax: The tax rate varies based on the type of company and the size of paid-in capital, generally ranging from 15% to 24%.

2. Personal Income Tax: Adopts a progressive tax rate system, with a tax rate range of 0%-30%.

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

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

5. Import and export taxes: The import tax rate varies depending on the type of goods and trade agreements; some resource products are subject to an export tax of 0-20%.

2. Legal Positioning and Tax Policies of Crypto Assets

The legal status of Crypto Assets

Malaysia does not recognize Crypto Assets as legal tender, but the Securities Commission regards certain Crypto Assets as "digital assets," which fall under the scope of securities regulation. Tokens that have the nature of investment contracts are identified as securities tokens, and their issuance and trading require regulatory approval.

Crypto Assets tax system

Malaysia currently does not impose capital gains tax on individuals holding Crypto Assets. However, if an individual is classified as a "day trader", their profits from Crypto Assets trading may be subject to personal income tax. The criteria for judgment include:

• Large holding amount
• Short holding time
• Frequent trading
• Intend to enhance market appeal
• Non-forced sale
• The motivation for the transaction is for commercial purposes.
• Short-term financing obtained for purchase

For enterprises or individuals engaged in Crypto Assets-related businesses, their earnings are usually considered business income and are subject to taxation.

Taxation Method

The method for calculating taxable income is: the disposal price of Crypto Assets minus the acquisition cost. For income received in the form of Crypto Assets, taxable income must be recognized at the fair market value at the time of acquisition.

If the tax authorities determine that the taxpayer's engagement in Crypto Assets trading constitutes "risky business activities", the related expenses can be deducted before tax.

3. The Evolution of Crypto Assets Regulatory Framework

Malaysia has gradually established a dual-track regulatory system centered on the Securities Commission (SC) and Bank Negara Malaysia (BNM). The main development process is as follows:

• 2014: BNM declared that it does not consider Crypto Assets as legal tender and will not regulate them.

• 2018: BNM issued anti-money laundering guidelines requiring Crypto Assets service platforms to fulfill related obligations.

• 2019: SC included digital currencies with securities characteristics under the regulation of the Capital Markets and Services Act.

• 2020: SC released the "Digital Asset Guidelines", detailing compliance requirements for ICOs, exchanges, and other aspects.

• 2021-2022: Focus on strengthening law enforcement against unauthorized platforms, and pay attention to emerging asset forms such as DeFi and stablecoins.

• August 2024: SC revises the "Digital Asset Guidelines" to further clarify the securities status of digital currency and related regulatory requirements.

4. Outlook

Malaysia adopts a prudent and gradual approach to crypto assets regulation, leaving room for innovation while ensuring financial stability. In the future, there may be further strengthening of cross-border regulatory cooperation, stablecoin reserve regulation, and platform audit mechanisms. The trend of digital tax compliance will also promote the integration of crypto assets with the mainstream financial system. In this policy environment, Malaysia is expected to unleash the potential of the crypto economy under the premise of controllable risks.