Overview of Malaysia's Crypto Assets Regulation and Taxation System

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, while indirect taxes include excise duties, customs duties, import and export taxes, sales tax, service tax, and stamp duty.

In administrative management, Malaysia implements a federal and local tax distribution system. The federal government is responsible for formulating national tax policies, which are implemented by the Inland Revenue Board and the Royal Customs Department for the collection of direct and indirect taxes, respectively. State governments mainly collect local taxes such as land tax, mineral tax, and forest tax.

2. Introduction to Main Tax Types

2.1 Corporate Income Tax

Companies registered in Malaysia are required to pay income tax on their global income. The tax rate varies depending on the size of the company:

• Local companies with paid-in capital not exceeding 2.5 million MYR:
  • First 150,000 MYR income: 15%
• 150,000 to 600,000 MYR: 17%
• Over 600,000 coins: 24%
• Local companies with paid-up capital exceeding 2.5 million MYR: 24%
• Foreign Companies: 24%

2.2 Personal Income Tax

Residents are required to pay taxes on income earned within Malaysia and on foreign income brought into the country. Non-residents are only required to pay taxes on income earned from work in Malaysia. Personal income tax is based on a progressive tax rate, ranging from 0% to 30%.

2.3 withholding tax

For specific income paid to non-residents, Malaysian payers are required to withhold and remit taxes. The tax rates vary depending on the type of income, such as 10% for special technical service income, 15% for interest, and 10% for contract fees, etc. The specific tax rates may be influenced by bilateral tax agreements.

2.4 Real Estate Profit Tax

Applicable to the transfer of real estate and related rights in Malaysia. The tax rate decreases with the holding period:

• Sale within 3 years: 30%
• Year 4 Sale: 20%
• Year 5 Sale: 15%
• Sale in the 6th year and thereafter: 5%

2.5 import and export tax

Most imported goods are subject to import duties, which are classified into ad valorem taxes and specific taxes. Malaysia has trade agreements with several countries and regions, implementing preferential tax rates. A 0-20% export tax is levied on certain resource-based products.

3. Crypto Assets Regulation and Taxation Policy

3.1 Legal Positioning of Crypto Assets

Malaysia does not recognize Crypto Assets as legal tender but considers some Crypto Assets as "digital assets" under securities regulation. Tokens that have the nature of investment contracts are classified as securities tokens, and their issuance and trading require regulatory approval.

3.2 Crypto Assets Taxation System

Malaysia currently does not impose capital gains tax on individuals holding Crypto Assets. However, if an individual is classified as a "day trader" or engages in related business, their earnings may be considered taxable income. The criteria for judgment include:

1. Holding Scale
2. Holding Duration
3. Trading Frequency
4. Whether to conduct market promotion
5. Trading Motivation
6. Financing Status
7. Other Related Factors

3.3 Taxation Method

For taxable Crypto Assets transactions, the taxable income is calculated by subtracting the acquisition cost from the disposal price. Income received in the form of Crypto Assets should be recognized at its market value at the time of receipt and taxed accordingly.

If Crypto Assets trading is deemed a "risky business activity", the related direct costs can be deducted before tax.

4. Evolution of the Crypto Assets Regulatory Framework

Malaysia is gradually establishing a dual-track regulatory system centered around the Securities Commission (SC) and the Central Bank (BNM):

• 2014: BNM declared that it does not recognize Crypto Assets as legal tender.
• 2018: BNM issued anti-money laundering guidelines requiring crypto assets service platforms to fulfill reporting obligations.
• 2019: SC included some Crypto Assets under securities regulation.
• 2020: SC issued the "Digital Asset Guidelines" to regulate ICOs, exchange operations, etc.
• 2021-2022: Strengthening law enforcement against unauthorized platforms, focusing on emerging asset forms.
• 2024: SC updates the "Digital Asset Guidelines", clarifying the securities status of crypto assets.

5. Future Outlook

Malaysia adopts a cautiously open attitude towards crypto regulation and is expected to further improve its compliance system and strengthen regional regulatory cooperation in the future. With the promotion of international standards, Malaysia may enhance its work in areas such as cross-border data exchange and stablecoin regulation. The digitalization of tax compliance will also become a trend, promoting the gradual integration of Crypto Assets into the mainstream financial system.

In this policy environment, Malaysia is expected to release the growth potential of the crypto economy while controlling risks, providing valuable experience for the development of regional financial innovation.