Tax on cryptocurrency Malaysia

Tax on cryptocurrency Malaysia

Badge of trade

Determining the existence of trade The general tax treatment for transaction gain / loss from the disposal of digital currencies is based on whether it is capital or revenue in nature.

The badges of trade such as profit seeking motive, nature of asset and changes to the asset are considered when determining if such gains are taxable. The followings are considerations in deciding whether elements of trade exist for transactions involving digital currencies:

1. Nature of subject matter

This refers to the nature of the digital currencies that is being bought and sold. The digital currencies could be regarded as the subject of trading when they are bought in large quantities.

2. Length of ownership

This refers to the holding period of the digital currencies. The shorter the holding period, the more likely it would be regarded as held for trading.

3. Frequency of transactions

High frequency of similar transactions of digital currencies is more indicative of trading than an isolated transaction.

4. Supplementary work

This refers to additional work done on digital currencies to make it more marketable or extra effort made to find or attract purchasers. If this is done, it is more likely that the subsequent disposal would be regarded as trading.

5. Circumstances of the realization

Some circumstances are less likely to indicate trading (e.g. company is forced to sell the digital currencies due to compulsory acquisition, sudden urgent need of cash or threat of foreclosure by creditors).

6. Motive

This refers to whether there was an intention to trade at the time of the acquisition of the digital currencies. If a person undertake the activities in a business-lime manners such as developing a business plan, preparing accounting records and advertising the digital currencies business, the intention is definitely to do a business of digital currencies.

7. Mode of financing

This refers to how the purchase of the digital currencies is being financed. Short term financing is more indicative of trading than long term financing. The company’s financial position and ability to hold on to the digital currencies will also be taken into consideration.

Source

IRB Guideline on tax treatment on digital currency transactions @ 26/8/2022

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