Bitcoin trading involves the act of speculation of changes in crypto currency’s price. There are exchanges where you can trade Bitcoins. These exchanges are public market places where the buyers and sellers can exchange or trade Bitcoins using fiat currencies and alternate coins.
The exchange can be considered a network or an online platform that acts as a connection between Bitcoins traders. There are specific rules and regulations for the trade of bitcoins maintained by the tax authorities in some places. According to the IRS, Bitcoin should be considered as an asset.
So there will be taxes on it. The taxpayers have to keep a record of the buying and selling of the Bitcoins. In the current Covid pandemic scenario, Malaysia’s security commission has granted complete approval to the trade or exchange of Cryptocurrency in the country. The trade can be done legally around Malaysia. Since there is an economic crisis due to the lockdown situation, many countries like Japan have also made Bitcoin trade legal.
It was Suruhanjaya Sekuriti, the Securities Commission Malaysia (SC) that approved the Bitcoin trade. According to the reports given by the news during the lockdown, crypto exchange operator Tokenize Malaysia received full approval from the Securities Commission Malaysia to operate a digital asset exchange (DAX),
Is There A Need To Pay Tax When Trading Bitcoin In Malaysia?
In the income tax act of 1967, which is the prime legislation in Malaysia’s sector of taxes, there are no current amendments regarding digital currencies like Bitcoins. According to the sources, it is not very clear whether Malaysia’s people are needed to pay taxes for the trade of bitcoins.
Complete guidelines about implementing a tax on buying and selling Bitcoins are yet to be published by the Inland Revenue Board of Malaysia (IRB) or Lembaga Hasil Dalam Negeri (LHDN). In an interview published on the Malaysian Institute of Accountant on 1 August 2018, the Director of International Tax Department, IRB, Mohamad Fauzi Saat, said that “As far as Malaysia is concerned, the IRB has not issued any guidelines in dealing with tax issues of Cryptocurrency as a comprehensive study is required to understand the subject matter fully.”
He also said that “Malaysia is committed to working towards issuing a comprehensive guideline on the tax treatment of Cryptocurrency by the end of 2020.” The chief executive officer Dato’ Sri Sabin Samitah on 19 January 2018 said that even though the Malaysian government has not made any regulations in the cryptocurrencies trade, all the businesses regarding it are subjected to Malaysian income tax. He also said that the Income Tax Act provisions that are now prevalent could apply to all the business regarding cryptocurrencies. So the person who is planning to do any trade of the Bitcoins is needed to consult a professional tax adviser to help with the trading activities, tax regulations, gains, and to declare the income from the cryptocurrencies.
The laws and regulations that are relevant in Malaysia
The laws regarding the tax payment prevalent in Malaysia can be considered fluid and can be adjusted or amended. They can be subjected to review, and the final proper guidelines are to be yet issued by the tax authorities. According to the current laws, the taxpayer can argue that the income is obtained from a foreign source, and it cannot be subjected to tax.
They can use against the application of the tax on the gains from the trade of Bitcoins. They can also say that this income is not obtained from the main work. It can be considered as a side job, hobby, or an investment. They cannot be considered as a professional trader and are not involved in any non-commercial activities. So the gain cannot be subjected to tax payment. In the covid pandemic’s current scenario, Malaysia’s Security Commission has given complete approval to the country’s cryptocurrencies’ operations.
They plan to make all the trade and transactions of Bitcoins and other cryptocurrencies legal in Malaysia. Since there is an economic crisis because of the corona pandemic countries apparent from Malaysia, Japan has also legalized the Bitcoin trade. Suruhanjaya Sekuriti the Securities Commission Malaysia (SC), approved the trade of cryptocurrencies in the country.
But it is better to deal with a professional tax adviser to get more information regarding the law. Bitcoin traders in Malaysia need to keep all the records. They have to ensure they can provide all the proper records and proofs regarding the Bitcoins trading transactions for the audit purpose when asked by the tax authorities.
How To Declare When Filing Taxes?
The taxpayer has to keep a clear and proper record of all the coins’ transactions, including the amount involved in the transaction and the transaction period. Whenever there is a query from the tax authorities, proper income tax disclosures have to be made. To do that, the taxpayer has to find out the net gain. For finding that, the details regarding the amount has to be known.
The trader has to the current cost of the cryptocurrencies from the selling price to get the net gain. To make this possible, the taxpayer has to keep a constant record of the bitcoin transactions to understand each transaction’s gain and loss. The person can consult a professional adviser to know more about it.
Is The Law Same For Both Individuals And Registered Persons?
The thing to be noted is that the law is not applicable in the same manner for both individuals and registered entities. According to the words of IRB’s chief executive officer, Dato’ Sri Sabin Samitah of Inland Revenue Board Malaysia, “Businesses involving Cryptocurrency are subject to Malaysian income tax.”
These businesses are not restricted to Cryptocurrency traders, investors, exchanges, and miners. He also said that the cryptocurrency company or traders would need to keep proper accounting and business records in Malaysia for audit by the proper law enforcement agencies.
If you are a professional Bitcoin trader or plan to become a professional Bitcoin trader in Malaysia, it is always better to consult a professional Bitcoin tax adviser. They will help you know more about the rules and regulations, know how to declare income tax suitable to your gain to the tax authorities, and help you grow in the trading activities without any legal issues.
To conclude, Bitcoins are only recently legalized in Malaysia. So before investing in it or trading it, you have to do proper research regarding the laws. All the banks in Malaysia may not regulate Bitcoin transactions, and the traders have to know about the risk it possesses.
Many well-known people like Izwan Zakaria, the managing director of Izwan and partners, Foo Zhi Yung and Sidney Marie Chin, legal interns at Izwan & Partners, consulted the trading of Bitcoins. Izwan and partners can be considered corporate/commercial and technology law firms in Malaysia, focusing on advising technology companies, early-stage start-ups, and investors. There are also many exchanges in Malaysia like Luno, CEX.io, Etoro, etc. where you can trade Bitcoins.