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Chinese New Year (CNY), also known as the Lunar New Year, is one of the most important celebrations in Chinese culture, dating back a staggering 3,500 years. Given that Chinese Malaysians are the second-largest ethnic group in our country, it is one of the many major festive celebrations observed in this beloved multicultural country we call home.
As we enter into the Year of the Snake this #CNY2025, one ubiquitous tradition for all CNY celebrations is the giving of ‘Angpows’ or red packets stuffed with money. Generally, it is customary for married adults to present angpows to children, teenagers and unmarried adults.
In Malaysia, the tradition has even assimilated into other cultures, as can be seen by the giving of similar ‘Raya’ envelopes of money during the Hari Raya Aidilfitri celebration. Furthermore, it’s also common for Chinese Malaysian employers to give their staff angpows for CNY.
With that in mind, given that these red packets could accumulate quite a lot of money, one question that may have crossed your mind is whether CNY angpows are taxable in Malaysia. As some companies in Malaysia provide yearly bonuses during CNY too, many may be confused as to whether the angpows from their employers should be considered part of their annual income that needs to be declared to the Inland Revenue Board (LHDN).
Well, for the Year of the Snake this #CNY2025, join us as we slither our way to the answer below.
Malaysia currently doesn’t impose inheritance, estate or gift taxes
In Malaysia, the legislation governing income tax is the aptly named Income Tax Act 1967. According to Section 4 of the Act below, taxable income in Malaysia includes income from business or profession, employment, dividends, rent, royalties, pensions and annuities.
Besides that, the Act also specified other classes of income which are taxable, but fret not, your angpows are generally safe from taxation, as they are considered “gifts”, which is not defined or included in the Act.
Unlike other countries, there are currently no gift taxes in Malaysia, with our country also not imposing taxes for inheritance or estate. Generally, a gift means “a voluntary transfer of money without any consideration” or “a personal gift or testimonial given gratuitously without expecting anything in return”.
Accordingly, when a gift such as red packets is given voluntarily on personal grounds and is unconnected to employment, business or anything related to profit, you don’t need to declare them to LHDN, and they’re not taxable.
However, LHDN may require proof that the angpow money is a gift
Things can get a bit tricky, though, as LHDN may require you to prove that the angpow money was voluntarily given and not related to income from employment. If the angpow money raises suspicion that a taxpayer is concealing income, LHDN may require you to provide documentary evidence that the angpow money are gift.
Generally, oral explanations by one party to LHDN are not acceptable as they raise suspicion that the taxpayer is attempting to conceal income. If such a situation arises, you are required to disclose the name of the individual who gave the angpow.
Moreover, if the person is your employer, the nature and reasons for the money should be clearly stated and recorded. If not, the employer may need to confirm to LHDN that the angpow money is a gift and is not related to any work done for the employer.
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