Virtual currency tax
Original link:
https://www.grenade.tw/blog/crypto-tax/
Do I need to pay tax on virtual currency withdrawals?
As virtual currencies play an increasingly important role in global financial markets, it is particularly important for Taiwanese investors to understand relevant tax regulations. In Taiwan, virtual currency is positioned as "virtual currency" and is a highly speculative digital commodity rather than a legal currency or payment instrument.
The basic principle of taxation is that profits from virtual currency transactions are considered "income from property transactions" and are subject to income tax in accordance with the provisions of Article 14, Paragraph 1, Category 7 of the Income Tax Act.
The key is that the tax is imposed during the "withdrawal" phase, when virtual currency is converted into legal tender and transferred to a bank account.
This guide will provide you with a detailed analysis of the latest regulations on virtual currency taxation in Taiwan in 2024, including the difference between domestic and foreign income, calculation methods, loss processing, declaration steps and legal tax-saving strategies, to help investors operate in compliance and optimize tax planning.
"Circumstances" in which virtual currency transactions are taxable
The taxation situation of virtual currency transactions is mainly divided into two categories: domestic income and overseas income. This distinction mainly depends on the "source of the final withdrawal and remittance".
In addition, if you only hold virtual currency on the exchange and do not withdraw money, you do not need to pay taxes.
Domestic income:
The final remittance party comes from a trading platform or financial institution "in Taiwan" (regardless of Taiwan dollars or US dollars)
Use C2C/P2P services and collect money using domestic accounts (bank, Line Pay, etc.)
For example:
Convert virtual currencies to Taiwanese dollars from Taiwan exchanges and withdraw funds to Taiwanese bank accounts
Although XREX can withdraw US dollars, the remitter is a domestic bank and is still domestically earned.
Foreign income:
The final remittance comes from a trading platform or financial institution "outside Taiwan"
For example:
Direct wire transfer of USD to Taiwan bank account via overseas exchange
Wire transfer US dollars to a digital account through an overseas exchange and then transfer it to a Taiwan bank account
It is important to note that even if the transaction is conducted on an overseas platform (ex. Binance), if the funds are ultimately withdrawn through a Taiwan exchange, it will still be regarded as domestic income. This is particularly important for many currency investors.
How to calculate the tax amount for virtual currency withdrawals
Domestic income calculation method:
This part of the income will be incorporated into the "total annual personal comprehensive income" and is calculated as follows
(Amount of withdrawal – initial investment cost / transaction loss) + other related domestic income (salary, dividend income, etc.)
"Personal annual total comprehensive income" is subject to "personal comprehensive income tax" according to progressive tax rates, but the initial investment cost requires a way to provide relevant proof.
Examples of domestic income:
Assume that Mr. Li has the following income in 2024:
1. Annual salary: NT$1.2 million
2. Dividend income: NT$800,000
3. Net profit from virtual currency: NT$500,000
Total revenue: 1.2 million + 800,000 + 500,000 = NT$2.5 million
Mr. Li will calculate and pay personal comprehensive income tax based on his total annual comprehensive income of NT$2.5 million.
Note: Net profit from virtual currency requires deposit cost
Calculation method of overseas income (overseas income)
This part of the income will be incorporated into the calculation of "personal basic income" and includes:
Total personal annual comprehensive income
Overseas income
Specific insurance benefits
Income from unlisted stocks and securities investment trust funds
Non-cash donation amount
If it exceeds NT$7.5 million, a 20% "basic income tax" will be payable on the excess amount. If the total declared overseas income is less than NT$1 million, no declaration is required.
Examples of foreign income:
Assume that Ms. Li has the following income in 2024:
1. Annual salary: NT$1.5 million
2. Overseas income: NT$3 million
Total revenue: 1.5 million + 3 million = NT$4.5 million
Since Ms. Li’s personal basic income of RMB 4.5 million does not exceed the threshold of RMB 7.5 million, she does not need to pay additional basic tax on this foreign income.
However, Ms. Li still needs to declare this 3 million yuan of foreign income when filing her tax return because it exceeds the 1 million yuan declaration threshold.
Special circumstances for income tax return amounts
Scenario 1: Basic income tax > Comprehensive income tax
In addition to paying taxes in accordance with the original comprehensive income tax regulations, an additional fee should be paid on the difference between the "basic income tax amount" and the "comprehensive income tax amount".
Scenario 2: Basic income tax ≤ comprehensive income tax
Only comprehensive income tax is payable.
When making overseas wire transfers, you can declare "268 Purchase (Sell) Foreign Virtual Assets"
Suggestions for legal tax savings with virtual currencies:
Directly transfer U.S. dollars to a Taiwan U.S. dollar foreign currency account using overseas wire transfers
For small traders (under 50,000 US dollars), you can choose Kraken wire transfer to withdraw money. The fixed handling fee is only 13 US dollars (some banks will charge additional transfer fees). It usually takes 1-2 working days to arrive in your account.
For large-amount traders (more than $50,000), you can consider using Bitfinex overseas exchange for U.S. dollar wire transfer services. The handling fee for large-amount withdrawals will be lower than Kraken. The disadvantage is that Bitfinex often requires proof of source of funds and address.
Finally, it is recommended to properly keep records of all transactions, deposits and withdrawals for future declarations, proof of fund sources and possible tax audits.
Extended reading: [2024 Latest] Cryptocurrency Withdrawal Guide: Step-by-step instruction on US dollar withdrawal and Taiwan dollar withdrawal
Common tax questions:
Q1: Only domestic withdrawals of 500,000 are required to declare
When a user makes a single withdrawal of more than NT$500,000 from a Taiwan exchange, the bank is obliged to report it to the Investigation Bureau of the Ministry of Justice. But that doesn’t mean it won’t be detected if it’s less than 500,000.
Q2: How to declare income
Domestic: Proceeds from property transactions (houses - applicable to those who cannot prove the acquisition cost)
Overseas: Proceeds from overseas property transactions
in conclusion
As the cryptocurrency market becomes more popular, related legal and tax issues become more complex, and the government is also developing standards to more precisely define domestic and foreign income, as well as situations involving cross-border transactions.
Therefore, seek the assistance of professional tax advisors when necessary to ensure compliance with investment transactions while maximizing your own investment returns.
Cryptocurrency is a high-risk investment, and the content on this website does not constitute any investment advice or responsibility.
