Is it legal to buy, sell and invest in cryptocurrency in Taiwan? What kind of property is it?
Cryptocurrency is an emerging financial asset. The overall investment environment is not as mature as stocks and foreign exchange. Fraud incidents are frequent, and some banks avoid undertaking cryptocurrency-related business.
If you want to start investing in cryptocurrencies, two common questions arise: Are cryptocurrencies legal? Do you have to pay tax?
Is it legal to buy, sell and invest in cryptocurrency in Taiwan? What kind of property is it?
When we determine whether property needs to be taxed, we must first determine what category the property belongs to and whether it is legal.
Let me start with the conclusion. Cryptocurrency is a legal investment commodity, and buying, selling and investing in cryptocurrency is not illegal.
Taiwan’s Cryptocurrency Authority – Financial Supervisory Commission (Financial Regulatory Commission)
The Financial Supervisory Commission serves as the promotion plan for the regulatory authority of virtual asset platforms with financial investment or payment properties.
The Executive Yuan has previously designated the Financial Supervisory Commission as the money laundering prevention authority for "virtual currency platforms and trading businesses" in accordance with the Money Laundering Prevention Act.
The current relevant bill is Measures for Preventing Money Laundering and Combating Terrorism Financing for Virtual Currency Platforms and Trading Business Enterprises
Mainly for KYC and money laundering prevention, Taiwan’s cryptocurrency-related practitioners need to master customer information, and must proactively report large-amount withdrawals (more than 500,000); currently, there is a tendency to regard cryptocurrency as a virtual commodity, except for money laundering prevention. There is no cryptocurrency legislation outside of the bill.
The Financial Supervisory Commission has stated that cryptocurrency supervision will be implemented in four stages:
Phase 1 - Taiwan Virtual Asset Platform and Transaction Business Enterprise (VSAP) Administrative Management
List of 25 businesses that have completed a money laundering prevention statement
The second stage - establishment of industry associations and self-discipline standards
Taiwan’s “Virtual Currency Association” was officially established: 24 players joined the membership | Blockchain
Phase Three - Strengthening Management
Stage 4 - Special Law
The report is expected to be submitted by the end of September this year, and a draft special law and public hearings will be held before the end of the year.
At present, the progress is in the second stage, and the industrial association has been established.
Important: There are legal custody businesses in Taiwan. Never listen to strangers’ messages and use unknown exchanges or currency buying and selling channels.
What are the tax standards for virtual currencies in Taiwan? Do I need to report and pay taxes when buying, selling and investing in cryptocurrencies in Taiwan?
In the case of stocks, buying and selling stocks in the securities market requires paying securities taxes, and the profit part is currently exempt from the securities taxes. However, cryptocurrencies do not have special laws (Securities and Exchange Law) like stocks. Currently, there is no special law for cryptocurrencies. , regarding tax filing at this stage:
For general investors, there is "no" need to pay transaction tax when buying and selling cryptocurrencies. Profits are regarded as profits from other asset transactions (such as profits from foreign exchange transactions). Income from property transactions is "required to be reported" and is incorporated into the personal comprehensive income tax.
Currency dealers whose main business is the buying and selling of cryptocurrencies, if their monthly sales exceed NT$40,000, are considered regular trading currency dealers and must complete tax registration and pay business tax and business tax.
The Political Yuan proposes that legal currency dealers must register for money laundering prevention. Violators may be sentenced to up to 2 years in prison｜Central News Agency CNA
As for the tax judgment on investing in cryptocurrency, it can be roughly divided into two parts:
1. Is it necessary to pay transaction tax when buying and selling virtual currencies: No
Just like buying and selling foreign currency at a bank, or buying and selling in-game items online, there is no need to pay additional transaction tax, and the transaction does not need to be declared.
2. Cryptocurrency personal income tax calculation method: Cryptocurrency withdrawals that are "profitable" need to declare income tax
Cryptocurrency is regarded as an asset and is considered personal property. Profits from transactions must be taxed, and shall be declared and paid together with the individual's comprehensive income for that year.
Income from property transactions: Category 7, Article 14, Paragraph 1, Income Tax Act
example:
Dongdong’s income from work this year is 500,000, and he has no other income. In the past, he used to pay a fixed amount of Bitcoin once every three years. He exchanged it for Taiwan dollars at the exchange in Taiwan and remitted it to his bank account. He made a profit of 1 million. The total income this year is 1.5 million. According to personal Deductions, filing jointly as a married couple, and graduated rates calculate the actual amount of tax you'll pay.
Key points for tax payment on cryptocurrency “profits”:
The profit time point is determined based on the exit.
Exiting refers to "liquidating cryptocurrency into Taiwan dollars and transferring it to a bank account." This action is called withdrawal in the currency circle. No matter when you enter the market, the time point when you withdraw money and the profit will be used as the benchmark.
Gains/losses from property transactions must be reported proactively
This is not like salary income. The company will report relevant information to the government when it pays salary. The government will have relevant information, so it can automatically remit the income information when filing taxes. Whether the transaction is profitable, the government has no relevant information. People use There may be many exchanges, and no one can accurately grasp the trading profits except you. You cannot automatically remit the money, and you need to declare it yourself.
If there are realized trading losses, they can also be declared together, and part of the property trading gains can be deducted.
There are two types of income tax returns, and most people have only used one of them: "Comprehensive income tax" and "Basic income tax"
The comprehensive income tax is the one that most people use when filing taxes every May. The other is the basic income tax, which is mainly applicable to people with a lot of overseas income.
Overseas income refers to income from outside Taiwan, such as renting a house in the United States, buying dividends from U.S. stocks and U.S. bonds... Overseas income is exempt from reporting within 1 million a year, and must be reported if it exceeds 1 million, plus other basic items. After income exceeds RMB 6.7 million, basic income tax will be paid (which will be increased to RMB 7.5 million when filing tax next year).
Announcement of the Ministry of Finance on Basic Income Tax
Announcement of the Ministry of Finance on Adjusting the Tax Exemption Amount
If the amount of comprehensive income tax > the amount of basic income tax = the amount of comprehensive income tax paid
If the amount of basic income tax > the amount of comprehensive income tax = the amount of comprehensive income tax paid + the difference between basic income tax and comprehensive income tax = the amount of basic income tax
It is equivalent to calculating the higher of the two and paying.
FAQ
Frequently asked questions about virtual currency taxation in Taiwan: Does C2C have to pay tax?
Regardless of the platform of a virtual currency C2C exchange, as long as the result is cashing out the virtual currency into cash, it is considered a withdrawal. Therefore, according to current regulations, if you make a profit after C2C, you need to proactively declare the income from property transactions, and declare and pay the comprehensive income tax in May of each year.
Frequently Asked Questions about Virtual Currency Taxation in Taiwan: Do I need to pay tax when selling Bitcoin?
The same as the C2C situation above. As long as there is a "profit" after selling Bitcoin and the withdrawal is converted into cash, you need to actively declare the income from property transactions. The withdrawal method varies (convert it into Taiwan dollars on the Taiwan Exchange). into a bank account > domestic income; converted into foreign currency at an overseas exchange and wired to a foreign currency account > overseas income), there are different tax exemptions and calculation methods.
Frequently Asked Questions about Virtual Currency Taxation in Taiwan: Do I need to pay tax on withdrawals from MAX Exchange?
MAX is an exchange under the MaiCoin Group and is one of the commonly used cryptocurrency exchanges in Taiwan. As long as you withdraw cryptocurrency through MAX, if you make a profit and file a tax return, you will need to pay relevant taxes according to the income tax-related tax system. item.
Frequently Asked Questions about Virtual Currency Taxation in Taiwan: Do I need to pay tax on withdrawals from Binance Exchange?
Similar to the situation of MAX above, no matter it is any exchange, as long as the money is withdrawn into the account and converted into cash, if there is a profit, relevant taxes will be paid according to income tax.
Virtual currency tax payment guide
How much income tax do you have to pay? Three examples of calculations for you to see
EXAMPLE 1:
Dongdong’s income from work this year is 500,000, and he has no other income. In the past, the fixed amount of Bitcoin was once every three years this year. He exchanged it for Taiwan dollars at the exchange in Taiwan and remitted it to the bank account (counting domestic income). He made a profit of 1 million, and the total income this year was 150. Ten thousand, and then calculate the actual amount of tax to be paid based on individual deductions, married couples filing jointly, and progressive tax rates.
Example 2:
Dongdong has an income of 500,000 from work this year and has no other income. In the past, he regularly traded Bitcoins on overseas exchanges once every three years this year, and wired them back to Taiwan in US dollars (counting overseas income), making a profit of 1 million, totaling 500,000 in domestic income this year. 1 million in overseas income.
Overseas income of RMB 1 million is exempt from declaration. This year, only the domestic income of RMB 500,000 needs to be paid comprehensive income tax.
Example 3:
Dongdong has an income of RMB 500,000 from work this year and has no other income. In the past, he regularly traded Bitcoins on overseas exchanges once every three years this year, and wired them back to Taiwan in US dollars (counting overseas income), with a total profit of RMB 3 million, and a total domestic income of RMB 500,000 this year. , overseas income of 3 million.
The overseas income of 3 million must be declared, and the domestic income of 500,000 is assumed to be 50,000 after calculating the deduction. The total net income of 3.05 million is lower than the basic income tax exemption of 6.7 million. The calculation method of basic income tax is tax-free.
The 500,000 portion of domestic income is subject to comprehensive income tax.
Cryptocurrency income tax category judgment criteria: Taiwan dollar withdrawal or foreign currency wire transfer
Domestic income - liquidate cryptocurrencies into Taiwan dollars on exchanges in Taiwan and withdraw funds to Taiwan dollar bank accounts
Overseas Income - Realize cryptocurrency into foreign currency on overseas exchanges, wire the foreign currency to a Taiwan foreign currency account, and must declare it as "268 Sale of Foreign Virtual Assets" when transferring the remittance. You can declare it as overseas income when filing taxes
Common myths:
**X There is an annual tax exemption of NT$6.7 million for cryptocurrency withdrawals from overseas income X
This is wrong information. The basic income tax has a tax exemption of RMB 6.7 million. The total basic income must be added when calculating, unless there is no other basic income at all except cryptocurrency profits. If the net comprehensive income for the year is RMB 1 million, the overseas income is only RMB 1 million. There is a tax-free limit of 5.7 million left. **
This part is more complicated. There are seven categories included in the basic income. Among them, the one that ordinary people are more commonly exposed to is comprehensive net income.
The adjusted exemption limit of 7.5 million will apply when filing taxes next year (2025).
How can you save taxes by investing in cryptocurrencies?
For ordinary people, there are three main points:
Profits from trading are subject to tax
Profit comes from the sales income minus the purchase cost. Please keep a record of your purchase expenses so that they can be deducted as costs. You have to declare profits, and you can also declare losses from property transactions.
The profit time point is determined based on the exit.
If you don't appear in the market, it won't be counted as a profit. Don't exchange it into Taiwan dollars. If you don't withdraw money, it won't be counted as a profit. Only withdraw the part that must be used. It can also be used with cryptocurrency payment, such as crypto.com credit card, crypto city online mall, etc. There is no profit problem if you directly use cryptocurrency to pay for consumption without converting it into Taiwan dollars for withdrawal.
Overseas income enjoys higher tax exemptions
Overseas income is exempted from declaration within 1 million yuan a year, and all basic income has a tax exemption limit of 6.7 million yuan a year (later raised to 7.5 million yuan). Withdrawals within this limit can be made in the form of overseas income (telegraphic transfer of foreign currency to a bank foreign currency account). Tax savings.
The above are basic tax-saving methods for general investors. If you are a larger investor and have a company or other income, please consult a professional accountant for more advanced tax-saving methods.
Summary - Cryptocurrencies are legal but still developing and the environment is not yet fully mature
Be careful of scams
In response to the two questions at the beginning: Are cryptocurrencies legal? Do you have to pay tax?
Current stage:
It is legal to invest in cryptocurrency, and ordinary people must declare income from property transactions when making investment profits, which can be divided into comprehensive income tax or basic income tax to calculate and pay tax; currency dealers must register and pay business tax.
future:
We will wait to see if the content is adjusted after the special law is proposed.
For investors who are new to cryptocurrency, the most important thing is to avoid scams. There are two key points to avoid scams:
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This article is reproduced in cooperation with: Daily Coin Research
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