Is Forex taxed in Malaysia

How Malaysia Forex trading tax rates are calculated?

Currency trading has gained popularity in Malaysia over the years, as online trading platforms became more accessible and barriers for entering the market decreased.

The Malaysian government is promoting financial literacy and investment awareness among its citizens through initiatives to encourage participation in the financial markets. Currency trading in the country is legal and regulated by the Securities Commission of Malaysia (SC). The regulatory body oversees not only FX but also stock trading, bond trading, futures and options trading. 

It should be mentioned that Malaysia has a very active trading community, and the number of traders participating in the market increases each year due to various reasons. While currency trading comes with certain risks, it has become a steady source of income for many traders. 

Is Forex trading tax free in Malaysia?

Currency trading is taxed in the country. Forex trading tax rates Malaysia residents have to pay are determined by the Inland Revenue Board of Malaysia (IRBM). IRBM is a major tax authority within the country. It should be mentioned that currency trading is considered a form of speculative investment and is subject to taxation in the country. However, individual traders and institutional traders are treated differently. It is also dependent how much money you make when trading on the Forex market.

Institutional full time trader income tax Malaysia residents pay depends on the nature and status of the institution involved. Institutional currency trading is done by banks, investment companies, and other entities engaged in Forex trading on behalf of their clients. Corporations or companies engaged in institutional currency trading are taxed by corporate income tax. The corporate income tax in Malaysia is 24% of the total income amount. 

Retail tax on FX trading Malaysia residents have to pay depends on various factors and it is calculated by progressive income tax. Meaning, they are based on individual income levels from trading. Here is the Forex trading tax calculator Malaysia residents can use:

  • When traders make less than 5,000 Malaysian Ringgit (MYR) there is no tax charged by the IRBM
  • Traders that make between 5,000 MYR and 20,000 MYR are taxed at 1% rate
  • Traders earning between 20,001 MYR and 35,000 MYR are taxed at 3%
  • Earnings from 35,001 MYR to 50,000 MYR are a subject to 8% tax rate
  • Profits from 50,001 MYR to 70,000 MYR are taxed at 14% rate
  • From 70,001 MYR to 100,000 MYR tax rate is 21%
  • Above 100,000 MYR is taxed at 24% to 30% rate

It should be noted that these rates are subject to change due to the Malaysian government decisions. In addition, any attempt to avoid tax on Forex trading Malaysia may result in penalties such as additional tax and legal proceedings. The penalty amount typically depends on the severity of the offense.

How to pay Forex taxes online in Malaysia

As already mentioned, taxation within the country is conducted by the Inland Revenue Board of Malaysia. The financial institution provides an online platform called e-Filing for taxpayers to file their tax returns. Retail currency traders fill in the income tax return form. Payments are done electronically. To pay income tax in Malaysia, simply follow these instructions:

  • Register as a taxpayer: First you need to register on the e-Filing platform. You can find the registration link on the website of the Inland Revenue Board of Malaysia.
  • Login to e-Filing: After registering on the platform, you can log in to your e-Filing account using an username and password.
  • Finalize your tax return application: complete your income tax return. Don’t forget to include your full income, deductions, and any tax credit that you have.
  • Calculate your tax liability: After filling out the application on the platform, e-Filing system will automatically calculate your tax liability based on the information that you have provided earlier.
  • Make tax payments: There are various payment methods available for you to use, such as: Online banking, credit/debit card methods, and electronic funds transfer (EFT). 
  • Verify and submit: carefully review your information before submitting to the IRBM and make sure there are no mistakes. Once satisfied, you can proceed with your payment. 

Trading from Forex tax free countries

Taxes can be a heavy burden for both retail and institutional investors. One way to avoid payments to the local regulators is to become a citizen of the country where currency trading is not taxed. Malaysia offers dual citizenship, however, there are limited rights that are associated with the status, including:

  • Limited rights: Dual citizens are limited in terms of political participation. They cannot be candidates in local and general elections.
  • Restrictions when it comes to land ownership: Specific types of property ownership such as agricultural land is not allowed for dual citizens. However, they can purchase residential and commercial property.
  • Military service: in Malaysia military service is mandatory for male citizens who meet the criteria. Citizens of Malaysia, including those who have dual citizenship are subject to serve the country when summoned. The mandatory service lasts for three months in the country.
  • Dual citizens of Malaysia must use their Malaysian passports when entering or exiting the country.

Here’s a short list of countries where currency trading is legal and free:

  • Cayman Islands: There is no income or capital gains tax on retail forex traders in Cayman Islands. However, if trading is done by institutions, taxes may apply.
  • United Arab Emirates (UAE): The UAE doesn’t have income tax on retail traders. However, traders should consider residency requirements of the country.
  • Bahamas: The Bahamas is famous for its tax free approach when it comes to financial trading. There is no income tax, capital gains tax, or inheritance tax in the country.
  • Georgia (country not a state): Georgia doesn’t have specific tax regulations or laws in place regarding forex trading. Financial trading is still largely unregulated within the country, which means that there are many possibilities for retail traders to trade tax free. There are various pathways that you can use to acquire the dual citizenship of the country, such as: being ethnic Georgian descent, getting married to a Georgian citizen, Investing in Georgian property, and making special contributions to Georgia; for instance in culture or in science. 

Key takeaways

To sum everything up, currency trading is taxed in Malaysia. Forex trading is fully legal and regulated by the Securities Commission of Malaysia (SC). The tax rates are determined by the Inland Revenue Board of Malaysia (IRBM), which is the main tax authority in the country. Institutional traders are taxed at 24% rate while retail traders are taxed at progressive rates: 

  • When traders make less than 5,000 Malaysian Ringgit (MYR) there is no tax charged by the IRBM
  • Traders that make between 5,000 MYR and 20,000 MYR are taxed at 1% rate
  • Traders earning between 20,001 MYR and 35,000 MYR are taxed at 3%
  • Earnings from 35,001 MYR to 50,000 MYR are a subject to 8% tax rate
  • Profits from 50,001 MYR to 70,000 MYR are taxed at 14% rate
  • From 70,001 MYR to 100,000 MYR tax rate is 21%
  • Above 100,000 MYR is taxed at 24% to 30% rate

To avoid paying taxes on currency trading, you should consider getting a dual citizenship of countries where currency trading is not taxed. A short list of such countries include: Bahamas, the United Arab Emirates (UAE), Cayman Islands, and Georgia. 

FAQs on Forex taxation in Malaysia

What is the Forex tax  rate in Malaysia?

The rate of Forex income tax Malaysia residents have to pay depends on how much they make. In other words, Malaysian taxpayers have progressive taxation system. 

  • When traders make less than 5,000 Malaysian Ringgit (MYR) there is no tax charged by the IRBM
  • Traders that make between 5,000 MYR and 20,000 MYR are taxed at 1% rate
  • Traders earning between 20,001 MYR and 35,000 MYR are taxed at 3%
  • Earnings from 35,001 MYR to 50,000 MYR are a subject to 8% tax rate
  • Profits from 50,001 MYR to 70,000 MYR are taxed at 14% rate
  • From 70,001 MYR to 100,000 MYR tax rate is 21%
  • Above 100,000 MYR is taxed at 24% to 30% rate

How do you pay Forex taxes in Malaysia?

FX tax Malaysia residents have to pay typically includes income tax. The Inland Revenue Board of Malaysia (IRBM) offers an online payment platform called e-Filing to taxpayers in the country. Residents of Malaysia register on the platform, fill in the information regarding their income, and make payments online. 

Does Malaysia have no tax on Forex?

Currency trading is taxed in the country. FX trading tax Malaysia residents have to pay depends on the level of income. Malaysians have progressive taxation system for retail traders. In addition, institutional traders are also taxed. 

Subscribe to Our Newsletter

Traders Love and Trust

Mugan Markets

Open a live account and start trading on one of the most transparent
trading platforms. Keep trading, keep winning.