Last few weeks I asked a few questions here in Lowyat regarding financial transactions, taxes, and business registration related to being a full-time trader. I did not get the answers I needed and continued digging.

Finally - I got to know that an old friend of mine is a Tax Lawyer and runs a tax consulting firm (how convenient) - decided to drop him a message, and he gave me a callback and was happy to answer all my questions.

I hope this will be useful for anyone that want to be a full time trader or doing trading as a side business. I think some of it will be useful for people who are self-employed and freelancing.

I will share my questions and the answers given by him below.

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1. Are profits from stock trading taxable, since its mentioned in LHDN document that capital gains are not taxable

If you're an active trader, yes. There is no specific number (trading frequency) given by LHDN on how they measure an active trader but to be on the safe side, assume that you are since you trade daily and it's your only source of income.

2. Do I need to register as a self-employed entity (sole-proprietorship/enterprise)?

Not necessary but recommended, especially if you earn more than RM100k a year. Register a company (apply for 5 years license) in SSN with your personal tax ID. You may not know what will you venture into in the future so it's good to have a company registered - If you decide to try other businesses, you can always use the same company name.
Registration of a company also allows you to open a corporate bank account which can help separate personal/business funds and it also helps for filing tax in the future.

3. Do I need to open a corporate bank account?

Again, not necessary but recommended. Plus corporate bank account has more flexibility/freedom in terms of transactions, unlike a personal bank account where you can get calls from the bank for above-average transaction amounts.

4. How will my income from trading be taxed? Do I use the numbers from tax statements given by the broker?

For your income to be taxed, you need to show funds in the bank account. As long as the money is in the brokerage account, it won't be taxed as there are no incoming transactions. You can make RM1 million realized gains (sold for profit) but if you never transferred it to your bank account, what will you show to the taxman?

5. Can I use funds from the business bank account for personal use?

I recommend transferring the funds you need for personal use to your personal bank account (from the business account), at least for the first 2 years to have a clean business transaction record and for ease of filing tax.

6. Will I have any problems applying for loans for a car or house, since I dont have monthly payslips to show?

Buying a car should not be a problem - the car salesperson can usually help you "kautim" with the banker. But for a house, yes.
They dont care where the money comes from but they want to know how much tax you have paid (and this is the first thing they will look at). From the tax payments, they can estimate your yearly income and if you are eligible for a loan based on other criteria (i.e credit report)
Again you can have RM1million cash in your bank account but if you have never taken a loan, no credit cards, no utility bills and have clean record with Bank Negara - most probably your loan will be rejected.

7. My initial investment funds from my US bank account (I used to work in the US for 8 years), will that be a problem since I have moved back for good to Malaysia recently and currently trading in Malaysia.

As long as you have paid taxes in the US for the funds and you have the proof (past tax filing statements), then it should be no problem.
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Thats it guys.
I dont know if some of the questions are silly but hopefully, it's helpful.
Let me know what you guys think - do you agree with these answers - do you have other answers from your source/reference
any personal experience to share?
Looking forward to your feedback.

Max

According to my friend, make sure the name under the brokerage account, the company, and the bank account has to be the same (either individual or multiple partners)
So if you want to trade for others, it's better to include them as your partner as if you guys are doing the trading together rather than you doing it for him (which I think is illegal if you're not a licensed fund manager)