The Inland Revenue Board (LHDN) of Malaysia has intensified efforts to curb tax revenue leakage by identifying individuals and companies engaged in high-frequency cryptocurrency trading. This move aims to enhance national tax administration and ensure compliance with tax regulations. LHDN chief executive officer Datuk Dr. Abu Tariq Jamaluddin highlighted the need for greater scrutiny of cryptocurrency transactions to prevent tax evasion.
Addressing Cryptocurrency Trading and Tax Implications
Cryptocurrency trading has become a significant area of concern for LHDN due to the high frequency of transactions and the potential for substantial profits that are often not reported for tax purposes. Datuk Dr. Abu Tariq Jamaluddin stated, “We understand that if there are a lot of transactions, profits from cryptocurrency trading are taxable. Individuals engaged in high-volume transactions are not reporting these activities to us.”
Ops Token Initiative
To combat tax revenue leakage, LHDN launched Ops Token in collaboration with the police and CyberSecurity Malaysia (CSM). This operation targets cryptocurrency trading activities across 10 locations in the Klang Valley, aiming to identify and address non-compliance among traders. The initiative reflects LHDN’s commitment to enhancing tax administration and ensuring that all taxable income is reported accurately.
Tax Corporate Governance (TCG) Programme
In addition to Ops Token, LHDN is promoting the Tax Corporate Governance (TCG) programme, which aims to provide a comprehensive understanding of taxpayer management, tax administration procedures, and tax risk management. The TCG programme fosters a collaborative relationship between taxpayers and LHDN, encouraging resolution of tax matters through consultation rather than confrontation.
Enhancing Tax Compliance
Abu Tariq emphasized that the TCG programme is designed to help organizations understand tax regulations related to their business activities and strengthen their internal systems for sustained tax compliance. “Through TCG, organizations can improve their comprehension of tax regulations related to business activities and fortify their internal systems for sustained tax compliance,” he said.
Programme Implementation
LHDN introduced the TCG programme on March 1, 2022, to bolster voluntary compliance among taxpayers. The programme was launched in two phases: a pilot project from June 1, 2022, to June 30, 2024, followed by full implementation starting July 1, 2024. This phased approach aims to gradually enhance the tax compliance culture in Malaysia.
Cryptocurrency Trading and Income Tax
Individuals engaged in cryptocurrency trading in Malaysia are liable for income tax on their profits. Abu Tariq urged traders to report their activities accurately and consult the guidelines available on the LHDN website for clarification. The move to regulate cryptocurrency trading is part of a broader strategy to ensure that all sources of income are appropriately taxed.
Conclusion
Malaysia’s Inland Revenue Board (LHDN) is taking significant steps to address tax revenue leakage by targeting high-frequency cryptocurrency trading. The launch of Ops Token and the promotion of the Tax Corporate Governance (TCG) programme are key initiatives aimed at enhancing tax compliance and administration. As Malaysia continues to develop its tax infrastructure, ensuring accurate reporting and compliance in emerging areas like cryptocurrency trading is crucial for sustaining the nation’s economic growth and integrity.
By fostering a collaborative relationship between taxpayers and the tax authority, Malaysia aims to create a more transparent and effective tax system. Individuals and companies involved in cryptocurrency trading are encouraged to comply with tax regulations to avoid penalties and contribute to the country’s financial stability.
