KUALA LUMPUR, Aug 29 — Income derived from digital cryptocurrency activities such as trading, mining, and exchange in Malaysia is subject to income tax under Section 4 of the Income Tax Act 1967.
The Finance Ministry (MOF) said this is because digital currencies are classified as commodities that can be considered business income.
This is in line with international tax practices, it said, adding that the Inland Revenue Board (IRB) has issued guidelines on the tax treatment of digital currency transactions, including the imposition of income tax, as a reference for taxpayers.
Digital services provided by local service providers are also subject to service tax under the Service Tax Regulations 2018.
Since January 1, 2020, service tax also applies to digital services supplied by foreign providers to consumers in Malaysia.
"This measure aims to broaden the tax base and ensure equal tax treatment between local and foreign service providers.
"As such, cryptocurrency trading platform services provided by either local or foreign service providers are subject to service tax, in accordance with the conditions and service classifications set," the ministry in a written parliamentary reply yesterday.
The statement was in response to Bagan MP Lim Guan Eng, who asked how Luno Malaysia, an international cryptocurrency platform owned by America's Digital Currency Group, could generate RM254 million in revenue but only pay RM3.8 million in taxes for the period from 2019 to 2024.
MOF said Luno Malaysia, which was registered with the Companies Commission of Malaysia in 2015 and approved by the Securities Commission in 2019, offer buy, sell, and storage services for cryptocurrencies such as Bitcoin and Ethereum, including shariah-compliant products like Islamic staking.
On the amount of income tax paid by Luno Malaysia, MOF clarified that corporate income tax is not calculated solely based on gross profit, but on taxable income after accounting for allowable expenses and specific tax treatments claimed under current tax laws.
"The amount of income tax paid by any company or taxpayer is also classified information and is subject to provisions under Section 138 of the Income Tax Act 1967.
"This confidentiality provision aligns with international practices to assure taxpayers in declaring their taxes to the relevant authorities."
