Taiwan's taxation of Cryptocurrency has caused public outcry. 'Even without cashing out, one must report,' Are the Ministry of Finance and the FSC playing their own game?

The tax regulations on Cryptocurrency income from the Taiwan Ministry of Finance have been released, sparking widespread public dissatisfaction. The unclear tax standards have caused public grievances on the internet, with many people questioning the independent actions of the Ministry of Finance and the Financial Supervisory Commission, leading to policy confusion. Experts are calling for a temporary suspension of implementation and the establishment of special laws to protect the rights and interests of the people. (Background: Taiwan's Cryptocurrency 'tax regulations' have been released, and the National Taxation Bureau has identified tax evasion of 130 million in 2024 coin sales) (Background supplement: Do Cryptocurrency investors need to pay taxes? What are the differences between domestic and foreign income, and can losses from Virtual Money be claimed?) The written report on the 'Cryptocurrency income tax regulations' submitted by the Ministry of Finance to the Legislative Yuan has been released, regulating the tax treatment of income from exchanges of virtual currency. The tax regulations explain the following: Securities-like virtual currency If individuals or businesses buy or sell this type of virtual currency, their trading gains and losses fall under the 'securities trading gains and losses' in the Income Tax Act. Taiwan has currently suspended the securities transaction tax, but companies still need to include these gains and losses in the calculation of the basic income tax base in accordance with the 'Basic Income Tax Base Act.' Non-securities-like virtual currency Individuals: If the buying and selling is non-routine (undefined), the income falls under the 'property exchange gains and losses' in the Income Tax Act. The tax treatment is as follows: the balance after deducting the purchase cost and related expenses from the transaction price is included in the comprehensive income tax calculation. Companies: The gains and losses should be calculated according to the provisions of the Income Tax Act: the income minus related costs and expenses is included in the business income and taxed according to the law. The Ministry of Finance stated that tax inspections are currently conducted through two main methods. First, the National Taxation Bureau in various regions lists individuals or businesses using virtual currency online trading platforms (exchanges) for trading as inspection items, and based on reports and data collection, requests relevant information and transaction details, and then determines the income and supplements taxes based on the data obtained. Second, in order to effectively grasp the tax source and prevent tax evasion, in addition to using existing tax data collection methods, the National Taxation Bureau in various regions also continuously reviews and optimizes the data collection methods and scope for emerging trading patterns such as long wick candles to improve inspection efficiency and levy taxes in accordance with the law. Dissatisfaction with tax regulations However, after the release of the Cryptocurrency income tax regulations, it quickly sparked public grievances on PTT. Many people criticized the government for unclear tax standards and overly hasty implementation, and even questioned the lack of coordination between the Ministry of Finance and the Financial Supervisory Commission, leading to confusion in the definition of virtual assets and tax standards. Firstly, the tax regulations of the Ministry of Finance are out of sync with the relevant regulations of the Financial Supervisory Commission, causing confusion among many people. The management of Virtual Money by the Financial Supervisory Commission is limited to the scope of financial regulation and cannot intervene in the tax policies of the Ministry of Finance, resulting in different definitions and treatment methods for virtual assets in different departments, leaving the public at a loss. Secondly, according to the regulations of the Ministry of Finance, individuals need to calculate the income from Cryptocurrency annually. Even if Virtual Money has not been exchanged for Fiat Currency (not cashed out), it may still need to be reported and taxed as required. Failure to report may be considered tax evasion. This has led many netizens to question the difficulty of accurately calculating the income. One netizen said: 'There is no asset in the world that is taxed before exchanging it for the country's Fiat Currency, so the government must look at where you deposit from and withdraw to, to calculate the total amount in New Taiwan dollars. Otherwise, should I pay tax on the profits from DOGE or SOL? But here's the problem: Let's say I deposit 1 million in a year, then make money, so I withdraw 110,000 a year. How do you calculate that? Even after 9 years, my cost remains non-zero, and I might end up losing money at the end. What income tax should I pay?' In addition, for investors holding multiple types of Cryptocurrency simultaneously, there is no clear regulation on how to offset gains and losses. For example, if there is a loss in BTC investment but a profit in DOGE, how should such a situation be reported? Can gains and losses be offset? The Ministry of Finance has not provided specific explanations, which may lead to subjective tax base determinations and expose the public to tax risks. Regarding Airdrop assets obtained through Web3 Wallets or cold wallets, the Ministry of Finance has not provided clear explanations on whether they need to be reported. The public has many doubts about whether such non-exchange gains fall within the reporting scope and is worried about being pursued for taxes in the future due to information asymmetry. Lack of supporting policies and communication, the need for special laws Experts point out that the tax policy for Cryptocurrency is extremely complex, and Taiwan has not yet enacted special laws for taxing virtual assets. While the Ministry of Finance mentioned conducting related research in the report, it did not reference international trends, nor did it hold public hearings to listen to public opinion, resulting in a disconnect between policy and people's livelihoods, increasing public distress. It is recommended that the government should postpone the implementation of the tax policy, collect opinions extensively, and aim to enact special laws to establish a more complete tax system. Related reading: Central Bank: Taiwan has not considered including BTC in forex reserves, and Peng Jinlong has announced the submission of a special law on virtual assets to the Legislative Yuan by next June Related reports: Hong Kong BTC purchases to be taxed! The government promises to implement an 'encryption asset reporting framework' and complete legislative amendments within two years On Lun's lawyer's special article: How are encryption assets taxed in Taiwan? Answering 5 major questions in the crypto world, distinguishing between current tax systems and the future Taiwan's first case: Is it illegal for individuals in Kaohsiung to buy and sell USDT privately, and could private Cryptocurrency transactions be illegal? The article 'Taiwan's Cryptocurrency tax regulations have sparked public grievances: 'Do you need to report even if you don't cash out?' published earliest on BlockTempo, the most influential blockchain news media in the dynamic trend of the blockchain world.