Bitcoin investors to escape ‘gain tax’

by AFIQ AZIZ / pic by TMR FILE

BITCOIN holders, who enjoy as much as triple gain this year, may not be taxed by the Inland Revenue Board (LHDN) as there is no clear guideline in taxing the cryptocurrency gain.

According to Malaysian Association of Tax Accountants president Datuk Abd Aziz Abu Bakar, the government may find it tricky to tax the cyrptocurrency, without establishing clear and concrete basis of such investment.

“First, we need the basis of why we want to tax them. Under which section that we will tax because this is neither under business income nor employment income.

“The closest section that can be taxed may fall under ‘other income’ — Section 4 (f) of Income Tax Act 1967 — which states the taxation from gains or profits not falling under any of the foregoing paragraphs.

“But this section is too broad and by doing so, it will have other repercussions towards the growing digital economy,” Abd Aziz told The Malaysian Reserve (TMR) in a phone interview yesterday.

Under the LHDN guidelines on taxation of e-commerce transactions, digital currency or token was named under its scope of charge.

This includes activities related to cryptocurrency, such as mining of the token, as well as buying and selling of such assets.

However, the guideline did not indicate how the cryptocurrency investors would be taxed, including the mechanism and the calculations.

TMR has reached out to LHDN, but there was no available comment at the time of writing.

In November, LHDN CEO Datuk Seri Sabin Samitah proposed the implementation of capital gains — in an effort to broaden the tax base including the taxation on cryptocurrency, and intangible and other digital assets in the future.

He said without the capital gains tax, these assets will be left untaxed, and he encourages aggressive tax planning and evasion.

The surge in bitcoin price has also triggered other regulators globally.

Recently, Israel revenue collector — Israel Tax Authority — has reportedly sent notifications to dozens of Israelis who own digital currencies, asking them to fully disclose their assets and be taxed accordingly.

In addition to sending letters to local citizens, the tax body has also sent inquiries to cryptocurrency exchanges operating in Israel and those based outside the country, Israel local news Globes reported.

Last year, Forbes named countries that have yet to tax digital assets investment — Singapore, Portugal, Malta, Belarus, Switzerland and Malaysia.

The price of bitcoin — which is also the leading digital coin — surged by almost 300% from only US$7,190 (RM29,010) in January, to its all-time high of US$28,495 as of yesterday, according to data from Coinmarketcap.com.

It broke its previous highest point of US$20,000 (in December 2017) on Dec 17, 2020. “So far, digital assets at this juncture are capital-gain free,” an investor who requested anonymity told TMR.

Currently, cryptocurrencies such as bitcoin, ethereum and ripple were made available on the digital asset exchanges (DAXs) trading platform of Luno Malaysia Sdn Bhd, Sinegy Technologies (M) Sdn Bhd and Tokenize Technology (M) Sdn Bhd.

Traders can buy those coins by transferring fiat money into the platform — which has local bank accounts before purchasing the digital coins in the DAXs. They can buy and sell the coins through the platform before cashing out the money into their personal bank account. As of now, there is no clear indication on how LHDN would trace the “materialised investment” made by traders.

An officer of the Securities Commission Malaysia, when contacted, confirmed with TMR that they are not holding details of the DAXs’ account holders, as they are undisclosed information.