Malaysia’s tax officials play their cards as collectibles turn into money-spinners

With the card-collecting hobby turning into a moneymaking venture with thousands of ringgit moved in single transactions, Malaysia’s tax authorities are keeping a close eye out for any tax discrepancies and doing audits to clarify statuses.

The Inland Revenue Board (LHDN) said it is aware of the growing market for high-value collectibles, in particular trading cards, and urged collectors to be aware of tax responsibilities if their hobbies are deemed to be business transactions.

“We are aware of the growing market for high-value collectibles, including trading cards. While such activities often begin as a hobby, they may become subject to income tax if they are carried out in a manner that indicates a profit-making or business activity under paragraph 4(a) of the Income Tax Act (ITA),” the board said.

The LHDN explained that it also has a mechanism to determine whether any profits made during such trading are taxable.

“To determine if profits from collectible trading are taxable, we apply established ‘badges of trade’ that evaluate various factors. These include the frequency and volume of transactions, the intention to make a profit (whether it’s speculative or a personal collection), the method of financing, the holding period and the level of organisation (example: systematic buying and selling or the use of platforms),” it said.

“Where activities resemble trading or dealing, which is similar to stock trading in nature though not identical in tax treatment, profits would generally be treated as business income under paragraph 4(a). However, occasional sales of personal collectibles without a profit motive are generally not taxable.”