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Is Forex Trading Taxable in Malaysia

Malaysia is a federal constitutional monarchy and attractive investment destination situated in Southeast AsiaMalaysia appeals to foreign investors across the globe due to its developed infrastructure, political stability, and undervalued currency, the Malaysian ringgit (MYR). The country boasts a prosperous financial sector which has in recent years adopted policies which aims to promote foreign investments and market competition.

  

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A quick Overview of our is Forex Trading Taxable in Malaysia Review:

 

The capital of Malaysia is Kuala Lumpur, home of the Kuala Lumpur Commodity Exchange (KLCE) and Bursa Malaysia, the local stock exchange. Malaysia has established strong trading partnerships  with other market leading Asian countries including South Korea, Thailand, Taiwan, Singapore, Japan, and China.  Up until recently it was not legal for Malaysian investors to trade on the Forex markets. However, the country’s authorities have introduced a set of rules to regulate trading activities on a local level and Malaysian retail traders may make use of the services of brokerage firms as long as the firm is locally licensed and compliant with the country’s laws.

 

Forex legislation in Malaysia

 

Internationally licensed Forex brokerages may legally offer their services to Malaysian customers but it is still recommended for these firms to receive authorization from the local regulator, the Securities Commission of Malaysia (SCM).  This SCM issues licenses and supervise companies which deal in securities.  The 1998 Money Changing Act is an Act which all foreign exchange brokers who operate on Malaysian soil must abide by. This legislation outlines that the Forex trading sector is not regulated by the country’s central financial institution, Bank Negara Malaya (BNM).  The BNM regulates the local currency MYR and licenses exchange businesses but is not tasked with regulating the activity of trading itself.

 

Financial regulators in Malaysia

 

There are in actual fact several entities who oversee the financial sector in Malaysia. Firstly, the Bank Negara Malaysia (BNM), which has the main  responsibility of controlling all aspects related to the local currency, the Malaysian ringgit (MYR).  Secondly, The Securities Commission of Malaysia (SCM), which is the primary overseer of Forex trading in the country. The SCM directly reports  to the Malaysian Ministry of Finance and is authorized to regulate companies which deal with securities and futures contracts in Malaysia. Thirdly is the Shariah Advisory Council of the BNM which is mandated to ensure compliance with the Shariah banking principles.

 

Forex payment methods in Malaysia

 

There are multiple options available to Malaysian Traders to fund their live trading accounts. Malaysian traders seem to prefer debit/credit cards, such as Visa, Maestro, and Mastercard.  Some Brokers who accept local investors may also accept UnionPay credit/debit cards. Other preferred and available options include bank transfers and  E-wallets such as Neteller, PayPal, and Skrill. Some Brokers may also support Perfect Money.

 

 

Taxation on Forex trading in Malaysia

 

Forex income is indeed taxable in Malaysia, and is seen as income tax. However, Forex capital gains are exempt from tax. What this means is if an investor trades with a swap-free Islamic account and are not deriving an income from their trading, any gain should be tax-free.

 

Capital gains tax in Malaysia

 

Malaysia does not tax capital gains on the sale of investments or capital assets other than those which is related to land and buildings. Capital gains are generally not subject to income tax in Malaysia.

 

Income tax in Malaysia

 

In 2022, the individual income tax has been reduced from 14 to 13 percent for resident taxpayers in the 50,000 ringgit to 70,000-ringgit band.

 

Regulated Forex Brokers accepting Malaysian Traders

 

Forex Time (FXTM)

 

FXTM or ForexTime was founded in 2011 and  is a registered brand name of Exinity Limited, regulated by the Financial Services Commission of Mauritius with license number C113012295.  FXTM offers users seven different accounts types where the execution method, range of markets, available platform, and commissions and fees may vary.  Three accounts are offered under the Standard category.  Forex Time (FXTM) is a MetaTrader broker which offers forex and CFD traders multiple account options for both MT4 and MT5 platforms.

 

Pros and Cons

 

Pros Cons
Segregates client funds Limited range of instruments
Established in 2011 Not ASIC Regulated
Regulated by CySEC
Min. deposit from $10

 

FXTM provides research in the form of daily technical and fundamental news analysis provided by an in-house team of analysts.

 

Trading benefits

 

Trading Features: Accounts offered: Funding methods:
Allows scalping Demo account Credit cards
Allows hedging Micro account Bank Transfer
Offers STP Mini account Payoneer
Low min deposit Standard account Neteller
Offers Negative Balance Protection Zero spread account
ECN account
Islamic account

 

Customer Service is available phone, email, online chat options – WhatsApp, live chat, Viber, Telegram or Messenger.

 

OctaFX

 

OctaFX is an online broker which was founded in 2011, offering Forex trading.  As OctaFX is regulated by the Financial Conduct Authority (FCA), each new client must pass a few basic compliance checks when signing up for an account.  OctaFX has won numerous industry awards over the course of 9 years and is one of the few brokers that offer both of the MetaTrader platforms; MT4 and MT5.

 

Pros and Cons

 

Pros Cons
Used by 300,000+ traders Doesn’t offer VPS
Established in 2011 Limited range of instruments
Regulated by FSA Not FCA Regulated
Min. deposit from $5

 

OctaFX provides an array of educational tools to assist beginner traders to become more experienced and even professionals in trading.

 

Trading benefits

 

Trading benefits Accounts Offered Funding Methods
Allows scalping Demo account Credit cards
Allows hedging Micro account Bank Transfer
Offers STP Mini account Neteller
Low min deposit Standard account
Guaranteed stop loss Zero spread account
Negative Balance Protection STP account
Islamic account

 

Customer Support is available 24/5 via Live Chat, Email, Phone, WhatsApp and an Enquiry Form across multiple languages including English, Indonesian, Hindi, Chinese and more.

 

BDSwiss

 

BDSwiss is a Forex and CFD broker which is regulated by CySEC.

 

Pros and Cons

 

Pros Cons
250+ instruments No US clients
Well Regulated No Fixed Spread Accounts
Commission Free Accounts
Free VPS
Daily Trading Alerts

 

BDSwiss offers full demo and Islamic accounts and traders can fund their account via one of multiple choices.

 

Trading benefits

 

Trading Features Accounts Offered Funding Methods
Negative Balance Protection Classic Wire Transfer
Multiple Trading Accounts VIP Credit Card
No Deposit or Withdrawal fee Raw Skrill
Neteller

 

BDSwiss offers multilingual customer support 24/5 via Live Chat, Telephone, Email, Call Back, WhatsApp, Telegram and an FAQ section.

 

AvaTrade

 

AvaTrade is an online broker which was founded in 2006 and offers Forex, CFDs, Spread Betting and Social Trading and is a global broker with their head office situated in The British Virgin Islands. AvaTrade is regulated in Europe, the British Virgin Islands, Australia, Japan, and South Africa by ASIC, CySEC and FCA.

 

Pros and Cons

 

Pros Cons
Used by 200,000+ traders Doesn’t offer VPS
Established in 2006 Not FCA Regulated
Regulated by Central Bank of Ireland, ASIC, IIROC, FSA, FSB, UAE and BVI
Min. deposit from $100

 

For those who are looking to start out with AvaTrade will need a minimum deposit of $250 and a demo account is available for those who want to get acquaint with the popular MT4 forex trading platform.  AvaTrade also offer mobile apps for Android and iOS.

 

Trading benefits

 

Trading Features: Accounts offered: Funding methods:
Allows scalping Demo account Credit cards
Allows hedging Micro account Bank Transfer
Low min deposit Mini account PayPal
Standard account Skrill
Islamic account Payoneer
Neteller

 

Customer support is available by email, phone, or live chat.

 

XM Group

 

XM Group (XM) is a group of regulated online brokers regulated by the Cyprus Securities and Exchange Commission.

 

Pros and Cons

 

Pros Cons
• Low stock CFD and withdrawal fees • Limited product portfolio
• Easy and fast account opening • Average forex and stock index CFD fees
• Great educational tools • No investor protection for non-EU clients

 

XM offers traders more than 1000 financial instruments to trade on both the MT4 and MT5 platforms, including Forex Trading, Stocks CFDs, Commodities CFDs, Equity Indices CFDs, Precious Metals CFDs and Energies CFDsForex trading is available on over 55 pairs, including the major USD, GBP, EUR and JPY pairs.  Traders must take note that XM does not offer binary options or futures.

 

Trading benefits

 

Trading Features Accounts Offered Funding Methods
Negative Balance Protection Micro Wire Transfer
Low Spreads Standard Credit/Debit
Low Commission XM Zero Neteller
Hedging Allowed UnionPay
Scalping Allowed WebMoney
Qiwi

 

Customer Service is available via live chat, Phone and email support.

 

Pepperstone

 

Pepperstone was founded in 2010 and is regulated by the Australian Securities and Investments Commission (ASIC), as well as the UK’s Financial Conduct Authority (FCA).

 

Pros and Cons

 

Pros Cons
Segregates client funds Limited range of instruments
Established in 2010
Min. deposit from $200

 

Trading platforms on offer include MetaTrader 4MetaTrader 5 and cTrader. All three FX trading platforms come with a free demo account which will allow traders to test out the forex broker and platform for 30 days.

 

Trading benefits

 

Trading Features: Accounts offered: Funding methods:
Allows scalping Demo account Credit cards
Allows hedging Mini account Bank Transfer
Offers STP Standard account PayPal
Low min deposit MAM/PAMM account Skrill
Offers Negative Balance Protection Islamic account Payoneer
Neteller

 

Pepperstone offers 24/5 multiple language support via email, phone and live chat.

 

HotForex

 

HotForex was established in 2007 is well regulated by FCA, CySEC, DFSA, FSCA and SFSA.

 

Pros and Cons

 

Pros Cons
Segregates client funds Limited range of instruments
Established in 2010 Not FCA Regulated
Regulated by CySEC
Min. deposit from $1

 

The HotForex MT5 terminal offers 21 different timeframes, superior analysis tools, trading across HotForex asset classes, close to 100 simultaneous charts, hedging and one-click trading and 80+ technical indicators plus an in-built economic calendar.  The account can be accessed from anywhere using an iPhone, interactive charts for 9 timeframes, advanced trading functions, one-click trading, 24 analytical objects, and 30 technical indicators.

 

Trading benefits

 

Trading Features: Accounts offered: Funding methods:
Allows scalping Micro account Credit cards
Allows hedging Mini account Bank Transfer
Offers STP Standard account Neteller
Low min deposit Zero spread account
Offers Negative Balance Protection Islamic account

 

Customer support is available via phone and email.

 

Forex.com

 

Forex.com is a platform which can be used for trading foreign currencies and precious metals. Traders can trade over 80 currency pairs as well as silver and gold.

 

Pros and Cons

 

Pros Cons
Segregates client funds Doesn’t offer VPS
Established in 1999 Not ASIC Regulated
Regulated by Financial Conduct Authority
Min. deposit from $50

 

To open a live trading account, traders will need a minimum deposit of at least $50.

 

Trading benefits

 

Trading Features: Accounts offered: Funding methods:
Allows scalping Demo account Credit cards
Allows hedging Mini account Bank Transfer
Offers STP Standard account
Low min deposit ECN account
Islamic account

 

Customer support is available by phone, live chat, or email 24 hours a day during market hours.

 

eToro

 

eToro is an online broker which was founded in 2006 and offers CFDs and Social Trading, with a head office based in Cyprus, UK.  eToro is supervised by the Financial Conduct Authority (FCA), Cyprus Securities and Exchange Commission (CySEC) regulatory bodies and has been in operation for over 14 years.

 

Pros and Cons

 

Pros Cons
Used by 6,000,000+ traders Doesn’t allow scalping
Established in 2006 Inactivity Fee
Regulated by Financial Conduct Authority, CySEC, ASIC Limited range of instruments
Min. deposit from $200

 

eToro offers traders two ways to trade: CFDs, Social Trading and eToro traders will need to make a minimum deposit of $200 and the platform can accommodate various levels of traders from beginner to expert.  Traders can trade in a wide variety of over 100 instruments and over 50 currency pairs on eToro’s user-friendly custom trading platform which is available as a browser-based web application. eToro also offers traders mobile apps for Android and iOS, making it easier to keep an eye on and execute trades.

 

Trading benefits

 

Trading Features: Accounts offered: Funding methods:
Offers STP Demo account Credit cards
Low min deposit Micro account Bank Transfer
Mini account PayPal
Standard account Skrill
Islamic account Payoneer
Neteller

 

eToro supports a wide range of languages including English, German, Spanish, French, and Italian.  24/6 customer support is available via telephone and support ticket.

 

IG

 

IG Group was founded in 1974 and is regulated by the Financial Conduct Authority (FCA) in the U.K. and the Australian Securities and Investment Commission (ASIC) in Australia.

 

Pros and Cons

 

Pros Cons
Used by 178,000+ traders Inactivity Fee
Established in 1974 Limited range of instruments
Regulated by Financial Conduct Authority and ASIC
Min. deposit from $250

 

The country of a traders residency will determine which account type they can open. In most countries, they will only be able to trade forex, CFDs and options.  Traders can choose between two trading platforms, IG’s proprietary trading platform or MetaTrader 4.

 

Trading benefits

 

Trading Features: Accounts offered: Funding methods:
Allows scalping Demo account Credit cards
Allows hedging Mini account Bank Transfer
Offers STP Standard account PayPal
Low min deposit Payoneer
Guaranteed stop loss

 

Customer Service is available 24/7 via Phone, Live Chat and Email.

 

  

 

Conclusion

 

Malaysian Investors should consider Regulation, Fees, Trading Conditions, Customer Support and Platform Choice before signing up with a Brokerage Firm.  Local Investors must also ensure that their chosen broker does indeed comply with all set rules and regulations in order to legally offer their services in the country of Malaysia.

Author Details

Louis Schoeman

Louis Schoeman

Featured Forex and Stocks writer

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