The plenary hall of the Kuala Lumpur Convention Centre (KLCC) was large and spacious.
Inside, a few hundred tax professionals listened intently to an unfamiliar subject matter at hand.
There are only a few people in Malaysia who can advise about taxation on crypto-assets and related activities; hence it was timely for our country to begin the conversation on this stage: The Malaysian Tax Conference 2018.
On stage; we had representatives from:
- The Tax Office (IRB); Mohamad Fauzi Saat, Regulations & Treaty Division Director
- A crypto-exchange; Fakhrul-Razi, CEO of Pink Exchange
- A crypto-mining business; Dr. Eric Ong
- An international tax leader; Anil Kumar Puri, Ernst & Young
- …and Colbert, Founder of BitcoinMalaysia.com moderating.
Here are our top 3 takeaways from the event.
1. Few accountants understand crypto.
When asked, only a tiny cluster (maybe ‘half-a-hand’ out of 10) of the audience raised their arms to show they have some understanding about cryptocurrencies. Although not new to us, crypto is clearly new for them.
On a promising note, this event looks like it just might be the turning point needed for some of those in attendance as I saw some of them waking up to smell the proverbial coffee. Malaysia will need a lot of professionals who can advise individuals and businesses about taxation on crypto-assets very soon.
It would not be an easy task to integrate crypto with the local accounting practice and ERP suites. However, Malaysians will have the opportunity to create some innovative solutions to all these challenges by starting now.
2. No taxing guidelines from IRB for cryptocurrencies yet.
It appears within the government, while they have also “heard” of Bitcoin before, the conversations needed to drive policy-making and the release of guidelines isn’t happening as urgently as it severely needs.
According to Mohamad Fauzi, this day was probably his first and most insightful conversation with people within the crypto space. He assures that the tax office is already conducting studies as well as actively participating in discussions at the regional level but declined to give a certain time frame. IRB might trail the regional consensus which may arrive in 2020.
3. IRB will need to prepare for an unfamiliar future… and fast.
Two years to release a guideline feels slow. The crypto-sphere moves extremely fast with liquid funds exchanging hands in the amount of hundreds of millions every day; especially so when dealing with crypto-to-crypto transactions. This will be a huge potential loss of tax revenue for the country if the authorities do not develop a complete response much faster.
Meanwhile, tax treatments shall continue to remain a gray area until an official statement would indicate otherwise. The responsibility still lies with the taxpayer to declare income gains from crypto-activities.
In the short term, we would need the tax office to deliver clear guidelines as to how:
- Will crypto be treated as a currency or commodity?
- What would be the treatment for income/gains from trading crypto?
- What would be the treatment for income/gains from HODL-ing crypto?
- What are the taxable events in Malaysia (crypto-to-crypto vs. crypto-to-MYR)?
- Will the tax rate attract or deter crypto-mining operations to be located in Malaysia?
- FIFO or LIFO? Which principles to follow?
In the long term, the tax officials will need to familiarize themselves with new ecosystems that:
- Have no bank accounts.
- Have salaries paid in crypto.
- Have children/machines earning income.
- Have blurred distinctions between borders
Bitcoin may or may not survive but cryptocurrencies are definitely the future.
There are currently more than 1,600 cryptocurrencies listed on coinmarketcap.com alone and close to $20 billion is transacted every 24 hours.
Before mainstream adoption of cryptocurrencies can take place in Malaysia, there must be clarity on accounting guidelines and tax policies. The positive takeaway from this event is that the conversation has already begun.
In our last post, Malaysia is currently trailing behind countries such as Vietnam, Philippines and Indonesia and Singapore – on a front which is possibly the most significant technology movement since the Internet.
We need to act faster or be left behind.