Malaysia: Tax Treatment of Digital Currency Transactions

On 26 August 2022, the Inland Revenue Board of Malaysia (IRBM) has issued the updated Guidelines on Taxation of E-commerce Transactions (e-CT) published on 13 May 2019. The Guidelines provides guidance on income tax treatment in respect of e-CT which includes general tax treatment of digital currencies or digital tokens. The Guidelines applies to any person that acquire or dispose digital currencies as well as involve in business of digital currencies such as trading, mining and exchanges of digital currencies.

“Digital currency” means a representation of value which is recorded on a distributed ledger whether cryptographically secured or otherwise, that functions as a medium of exchange and is interchangeable with any money, including the crediting or debiting of an account.

“Digital token” means a representation which is recorded on a distributed ledger whether cryptographically secured or otherwise.

Generally, digital currency transactions in Malaysia are taxed based on Section 3 of the Income Tax Act 1967 (ITA) where income of any person accruing in or derived from Malaysia or received in Malaysia from outside Malaysia is taxable.

The followings are the tax treatments in respect of specific transactions involving digital currencies:

1.      Trading of digital currencies

- Taxed on the profit derived from trading in the digital currencies similar to the trading of stock

2.      Mining of digital currencies

- Subject to tax according to the existing income tax provisions if profit-seeking motive is established

3.      Receiving and paying for business transactions in digital currencies

- The transactions involving digital currencies should be accounted similar to normal business 

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4.       Paying of salaries and wages to employees in digital currencies

- The payments are deductible to the business as an expenses

- The salary and wages received are taxable

Taxpayers are advised to keep records include:

· Records to determine the nature of transactions

· Records to determine the value of digital currency based on online exchange

· Date of transaction

· Receipts of purchase / transfer of digital currency

· Exchange records

· Bank statements