So guys, I am so curious and for so long wanted an answer once and for all for all the people out there in Malaysia that is doubting about whether or not earnings from Binary option trading and Forex are legal.

As far as I know, there is no such law against Binary option right now, but hypothetically if someone was to earn a lot of money from Binary option and Forex, and let say if the bank/lhdn comes knocking, what should one do?

Will the money consider as tax free overseas income? Or will be seen as capital that could not be tax? Or simply illegal "black money" if you will?

forex requires license. either money changer for hard cash or bank for electronic transfer / wire / TT.
some like western union, money gram all have license. u can check on bank negara site , under forex license. if its not listen, its not licensed.

NOW, bank negara regulates financial rules IN MALAYSIA. therefore almost all companies that does this locates their country outside of malaysia so bank negara cant catch them. this doesnt mean it is legal.


on the topic on binary... better go to genting. higher chance of winning plus its ban in multiple other countries ( reference: https://en.wikipedia.org/wiki/Binary_option )

copied from wikipedia:

On June 6, 2013, the U.S. Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission jointly issued an Investor Alert to warn about fraudulent promotional schemes involving binary options and binary options trading platforms. The two agencies said that they had received numerous complaints of fraud about binary options trading sites, "including refusal to credit customer accounts or reimburse funds to customers; identity theft; and manipulation of software to generate losing trades." Other binary options operations were violating requirements to register with regulators.[14]

Hey Stephen, thanks for the quickest reply , that answered mostly for the legal or not part but, regarding if someone really made money for a living from forex or binary option platform, will the lhdn and bank come question? It would be best if someone really had experience with this sorta things can come up here with smth.

Reporting Obligations Under The AMLA

What is a Suspicious Transaction?
Suspicious transaction refers to any transaction (including attempted or proposed), regardless of the amount that:
i) appears unusual;
ii) has no clear economic purpose;
iii) appears illegal;
iv) does not commensurate with the customer’s profile or business activities;
v) involves proceeds from an unlawful activity; or
(vi) indicates that the customer is involved in money laundering or terrorism financing activities.

http://amlcft.bnm.gov.my/AMLCFT05a.html

so with that, will the lhdn and bank come question?

Many many years ago, my "imaginary uncle" who used to do forex trading...he bought a new car with the proceed.......he ended up with buying a large insurance policy with the sister of the investigating lhdn officer...

sorry for I wasted your time, for I am not doing as advise in "It would be best if someone really had experience with this sorta things can come up here with smth".

Thanks for replying, btw this part of the post is beyond me, could you kindly reiterate more detail for this part if u dun mind

That's basically bribing the officer la.

Basically it means it's illegal.

Both are illegal.

FX trading platform need BNM license. Binary Option platform need Suruhanjaya Sekuriti license. None have granted license so far.

Whats the risk for the trader? The main risk is that if something r to happen to these platforms, you have no where to complaint or get recourse for any help from the authorities.

yeah the sad thing is, most people are just greedy. they KNOW it is illegal, they KNOW it is a scam. but they still go into it, hoping they will be making billions. sad fact of life.

Most of the company you see out there is register outside Malaysia. FX company very high risk goes bankrupt because they are bucket shop. All you short/long is bet with the company. They're not like bursa(middle man).

Earning money from trading FX or binary options is not illegal on its own. It is operating an unlicensed FX or binary options trading scheme that is illegal. So, whatever proceeds you earn from your FX or binary options trading is not illegal income. The question is whether it's taxable or not.

There are quite a lot of grey areas here and I've never got a clear answer from LHDN even though I've tried asking a few times. The impression I got was this:

1. If your only source of income is from trading in FX, binary options, stocks, bonds, etc., whatever you have earned is taxable income.

2. If you have other sources of income too, LHDN applies a threshold. So, if at least 90% of your income comes from trading, that is considered taxable income. Less than 90% of your income comes from trading, it is not taxable.

3. If you lose money in one tax year, do you get a tax credit to be applied the next year? This is the question that LHDN wasn't able to give me a clear answer.

This post has been edited by mesothelium: Apr 25 2017, 10:44 AM

This is the problem with your LHDN, they are not ready for taxing trading derived income.
When they say if more than 90% of your income is derived from trading, did they provide the link to the law stating that? If yes, can you share with us?

so the 90% clause got any black and white?
90% means how? If got main job earning 36k/annual then trading forex stocks can earn "up to" 360k/annual and not taxable?
this rule sounds so weird

I presume that means your income from overseas investment must not exceed 90% of your main income.

Let's say you earn RM36k p.a.

Your income from overseas investment (FX/Binary) must not exceed RM32,400 p.a.

do you mean RM 324000?

How about capital gain from bursa? also cannot exceed 90%?
it's still kind of grey area as far as I know?

Nope, it's RM32,400.00 .
Logically speaking, if it's RM324,000, then it would be higher than your main income
Of course it will be taxed as it is higher than your main income

Refer to the this :


However the % of taxes is yet to be determined as there's no clear-cut guideline on it

This post has been edited by Mr.Weezy: May 15 2017, 09:24 PM

Actually, it's not black and white and I'm not even sure if it's completely legit. I could never get a proper written directive from LHDN and the impression I get is they are not 100% sure themselves.

I think I understand the rationale though. The idea is that if "most" of your income comes from trading, then your "real job" is trading, and you should be taxed on that trading income.

The complication is that you might make 360k one year and the next year you lose 200k. Does that mean you get a tax credit on that 200k you lose? That is the one that I couldn't get a straight answer from LHDN.

If there is no black and white then there is a very good chance that you will win in the court if they suddenly want you to pay the tax. This is because trading/investing is a type of capital gain and it's stated that capital gain has no tax.

There's a rule (which is in black and white) that if your entire business is "trading", say you are a broker or a market maker, it is treated as income and not capital gains. See, for example, the discussion in The Star here:

http://www.thestar.com.my/news/nation/2012...e-to-be-taxing/

Profits derived from dabbling in the share market is an adventure in the nature of trade and is taxable as a business income if some characteristics of the badges of trade as follows exist: profit-making motive such as engaging the service of a portfolio manager; assets were purchased with the intention of selling for profit; and the period of ownership.

Anyway, I've only looked into this out of my own interest and I don't make a business out of trading or investing. I would advise that, if you are serious about this, you consult a relevant tax expert.

From the facts given, IRB is of the opinion that the income derived from dabbling of shares in the shares market is not in the nature of trade and not taxable as a business income under section 4(a), Income Tax Act 1967. However, it might be taxed under other gain or profit under section 4(f) of the Income Tax Act 1967 if such activity is carried out frequently.

How frequent is frequent. The IRB should state it clearly.

Nice share by the way.