Whether The Bitcoins Are Taxable?

What is Bitcoins?

The Bitcoins is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.

How to buy and sale Bitcoins?

The investor may buy the Bitcoins through online platform such as Coinbase, they may getting a digital wallet and keeping track of private keys. Then the investor can choose an exchange services, they can biding for the coin. If someone accepted their bid, it means the order is filled, the coin will transfer in their wallet within the exchange. On the other hand if they want to sale, they had to set an asked price, then the exchange is take place.

Would the profit arise from Bitcoins are taxable?

Currently, no specific provision under the Malaysia Income Tax Act 1967 deal with Bitcoins transaction. However, it always not denied the right of Inland Revenue Board (IRB) to impose taxes on Bitcoins transaction. According to Sec 3, Income Tax Act 1967, the tax shall be charged upon the income accruing in or derived from Malaysia. Therefore, it is a responsible of investor to keep a proper books of accounting and business records of being audited by Inland Revenue officer.

Let us examine their tax resident

Absolutely difficult to determine whether the investor is a tax resident, as the investor may move around the world to avoid being classified as a tax resident in Malaysia. If the investor sales their bitcoin oversea, and bring back to Malaysia they can argue that their income from oversea. Thus, not subject to Malaysia tax.

Are they consider a trade?

We use badges of trade as a guide

1) The subject matter

The bitcoin has no business, no cash value and merely a speculative instrument. However, the revenue officer might argue the bitcoin have the characteristic of an asset held for trading.

2) Period of ownership

If the investor tend to hold the currency over a long term period, it is a investment, unless the investor trade actively it would considered an adventure in nature and subjected to tax.

3) Frequency of transactions

Since the Bitcoins transactions are available publicly, traceable and store in Bitcoin network. Therefore, the officer could able to identified the owner of Bitcoins and determine their intention of trade.

4) Alteration

The investor is unable to alter the Bitcoin in order to make the Bitcoin more saleable.

5) Method employed in disposing of property

Since it is a online transaction, it is easy for the investor to trade with the Bitcoins exchange market. Furthermore, the Bitcoins can even use as a medium to buy the goods and services.

6) Circumstances responsible for sales

This could be very subjective, because it depend the intention and the need of selling of Bitcoins.

Conclusion :

What would you judge? Taxable or not? Base on the analysis above it may considered engaging in an adventure in the nature of a trade and the gains are therefore taxable.

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