Written by: Xie Yancen
[Scope of Research] This report systematically reviews Hong Kong's tax rules regarding digital assets from 2020 to the present. We analyzed various guidelines issued by the Hong Kong Inland Revenue Department, regulatory documents issued by the Securities and Futures Commission and the Hong Kong Monetary Authority, relevant ordinances passed by the Legislative Council, and official documents such as policy declarations issued by the government, hoping to provide readers with a comprehensive and clear regulatory picture.
[Key Conclusions] Reviewing the development over the past few years, Hong Kong's digital asset tax regulation has followed a clear path: first, in 2020, DIPN 39 established the basic principles for digital asset tax treatment; then, various regulatory documents (trading platforms, staking services, stablecoins) were gradually supplemented to support tax administration; next, the Crypto Asset Reporting Framework (CARF) was implemented through legislation; and finally, tax incentives were provided through policy declarations. Overall, the regulatory trend is towards greater standardization and transparency, while also becoming increasingly aligned with international standards.
Chapter 7 A Comparison of Digital Asset Tax Administration in Hong Kong and the United States
Having reviewed the digital asset tax regulatory systems of Hong Kong and the United States, this chapter will provide a comprehensive comparative analysis of the digital asset tax management in the two regions, clearly presenting the core similarities and differences, and offering a reference for digital asset investors and market participants in their cross-border planning and compliance strategies.
7.1 Comparison of Tax Principles
7.1.1 Taxation Principles
Hong Kong : Strictly adhering to the principle of territorial taxation , profits tax is levied only on profits from digital asset transactions generated or derived in Hong Kong. Profits from digital asset transactions generated overseas do not need to be declared and taxed to the Hong Kong Inland Revenue Department. Tax administration focuses on locally taxable activities.
The United States implements a global income taxation principle with broad coverage—U.S. citizens, green card holders, and U.S. tax residents who meet the substantial residency test are required to report and pay taxes on their digital asset transactions to the Internal Revenue Service (IRS) regardless of where the transactions occur globally, with no territorial exemptions.
7.1.2 Capital gains tax
Hong Kong : No capital gains tax, a significant core advantage. For digital assets held as long-term investments (such as Bitcoin, Ethereum, etc.), the proceeds from the transfer are considered capital gains and are not subject to any profits tax; profits tax is only levied on operating profits when the transaction is determined to be a frequent and organized business activity.
The United States has a well-established capital gains tax system with different tax rates based on the holding period. For digital assets held for less than one year, the transfer income is considered short-term capital gains and is taxed at the general income tax rate (maximum 37%). For digital assets held for one year or more, it is considered long-term capital gains and is subject to tiered tax rates (0%, 15%, 20%), with collectible digital assets (such as some NFTs) subject to the highest tax rate of 28%.
7.1.3 Gift Tax and Inheritance Tax
Hong Kong : Since 2006, gift tax and inheritance tax have been completely abolished. The gifting and inheritance of digital assets have no tax obligations themselves. The focus is only on the determination of the nature of the transaction in the subsequent disposal stage, which greatly reduces the tax cost of digital asset wealth transfer.
The United States retains gift and estate taxes, implementing a unified tax exemption system. In 2026, the unified tax exemption for lifetime gifts and estates will be $15 million, with amounts exceeding this exemption subject to a maximum tax rate of 40%. Digital assets, as a type of property, must be included in the tax exemption calculation when gifted or inherited, making tax planning more complex.
7.2 Comparison of Tax Treatments
7.2.1 Qualitative Analysis of Digital Assets
Hong Kong : Adopts a principle of differentiating by transaction nature , offering greater flexibility. Digital assets held as long-term investments are considered capital assets, and gains from their transfer are tax-free; digital assets traded frequently for arbitrage purposes are considered operating inventory, and gains from their transfer are subject to profits tax based on operating profit. The core principle is to comprehensively determine this based on factors such as transaction frequency and holding purpose.
The United States adopts a uniform property classification principle with no room for differentiation. Regardless of the frequency of transactions or the purpose of holding, digital assets are uniformly regarded as "property." Sales and exchanges are subject to capital gains or losses, with only certain business scenarios (such as professional mining) considered as operating income and subject to ordinary taxation.
7.2.2 Tax Treatment of Common Transaction Scenarios
Transaction scenarios | Hong Kong tax processing | US Tax Treatment |
Purchase digital assets | No immediate tax burden is incurred; only transaction records are retained for future reference. | No immediate tax burden is incurred; however, the purchase cost must be recorded as a basis for subsequent accounting. |
Selling digital assets (long-term investment) | Capital gains are not subject to profits tax. | Long-term capital gains are taxable at rates ranging from 0% to 20% (28% for collectibles). |
Selling digital assets (frequent trading) | It is considered operating profit and is taxable (16.5% for corporations / 15% for non-corporations). | Short-term capital gains are taxable at the ordinary income tax rate (maximum 37%). |
Exchange digital assets | Depending on the nature of the transaction, long-term exchanges are considered capital gains (tax-free), while frequent exchanges are considered business transactions (taxable). | Treat it as a taxable event and calculate the capital gain or loss at the fair value at the time of the exchange. |
Mining Rewards | Earnings obtained during the course of business operations are considered operating income and are taxable under profits tax; there are no explicit taxation requirements for non-commercial mining by individuals. | Regardless of whether it is a business activity or not, it is considered ordinary income and is taxed at the corresponding tax rate. |
Staking Rewards | Earnings obtained during business operations are considered operating income and are taxable under profits tax; personal non-business pledges have no explicit taxation requirements. | It is considered ordinary income and should be declared and taxed at fair value upon receipt. |
Airdrop/Fork | Earnings obtained during business operations are considered operating income and are taxable under profits tax; income earned by individuals for non-business purposes is not subject to explicit taxation requirements. | When acquiring control, it is treated as ordinary income at fair value and is taxable. |
7.2.3 Cost-based accounting
Hong Kong : There is no clearly defined statutory accounting method, allowing for greater flexibility. Taxpayers are generally permitted to choose reasonable accounting methods (such as FIFO, weighted average, etc.), with the core requirements being that the accounting methods are consistent, traceable, and accurately support tax return data.
United States : The accounting rules are strict and clear. Starting January 1, 2025, it is prohibited to mix the cost basis across wallets and addresses. Costs must be calculated separately for each wallet/address. Methods such as FIFO, LIFO, and HIFO can be selected, but consistency must be maintained after selection, and changes must be approved by the IRS.
7.3 Comparison of Regulatory Frameworks
7.3.1 Regulatory Document System
Hong Kong : Building a three-pronged regulatory framework of "guidelines + policies + legislation," focusing on both compliance and development.
Tax guidance: "Interpretation and Implementation Guidelines of the Tax Regulations No. 39" (DIPN 39, 2020) clarifies the core principles of tax treatment for digital assets;
Regulatory guidelines: Guidelines for Virtual Asset Trading Platforms (2023) and Guidelines for Virtual Asset Pledge Services (2025) to regulate the operation of licensed institutions;
Legislation and Policy: Stablecoin Regulation (2025), Digital Asset Development Policy Declaration 2.0 (2025), Draft Amendment to Tax Regulations (2026), improving institutional safeguards.
The United States : With "notice + ruling + legislation" as its core, regulation places greater emphasis on tax compliance and risk management.
Tax notices, such as Notice 2014-21 and Notice 23-34, clarify the tax treatment of various digital asset transactions.
Tax rulings: Revenue Ruling 2019-24, Revenue Ruling 2023-14, etc., which refine the tax determination standards for specific scenarios;
Legislation and Guidelines: The Infrastructure Investment and Jobs Act (IIJA, 2021) and the 2022 IRS Tax Guidance, clarifying regulatory bottom lines;
Application form: Form 1099-DA, which regulates the reporting of information related to digital asset transactions.
7.3.2 Information Reporting Requirements
Hong Kong : Adopting a "phased approach" to balance compliance and market adaptation.
Crypto Asset Reporting Framework (CARF): Information collection is planned to begin in 2027, and automatic information exchange with partner jurisdictions will be implemented in 2028;
Common Reporting Standards ( CRS ) revision: planned for implementation in 2029, formally including crypto assets in the reporting scope;
Record keeping by licensed institutions: In accordance with Section 51C of the Inland Revenue Ordinance and specific guidelines, relevant records shall be retained for no less than 7 years to ensure traceability.
United States : Implements a "mandatory reporting + strict supervision" model with high requirements for information transparency.
Form 1099-DA: For the 2025 fiscal year (tax return in 2026), brokers are required to report total trading revenue; for the 2026 fiscal year (tax return in 2027), additional reporting of cost basis and holding period is required.
FBAR (Foreign Bank Account Reporting): Foreign financial accounts (including digital asset accounts) with a total value exceeding US$10,000 at any point in time must be reported;
Form 8938: Certain foreign financial assets (including digital assets) that meet the reporting threshold must be proactively reported;
7.4 Comparison of International Cooperation (Cross-border Information Exchange)
Hong Kong : Leveraging its position as an international financial center, it will gradually improve its cross-border information exchange system.
To implement the OECD Crypto Asset Reporting Framework (CARF), the plan is to conduct automatic exchange of digital asset information with partner jurisdictions by 2028;
Promote the revision of CRS, and include crypto assets in the scope of cross-border information exchange starting in 2029 to improve tax transparency;
We have signed comprehensive double taxation avoidance agreements with more than 40 countries/regions to avoid the double taxation risk of cross-border digital asset transactions.
United States : Cross-border regulatory cooperation started early and has a wide coverage, with unilateral regulation plus multilateral cooperation as its core.
Committed to implementing the OECD Crypto Asset Reporting Framework (CARF), with plans to conduct automatic information exchange with eligible jurisdictions by 2029;
It has not implemented CRS (Common Reporting Standard) and only exchanges financial asset information with some countries/regions through bilateral tax treaties, and does not participate in the CRS multilateral automatic exchange.
The Foreign Account Tax Compliance Act (FATCA) mandates that foreign financial institutions report account information of U.S. tax residents to the IRS, thereby strengthening cross-border tax oversight.
Tax agreements have been signed with multiple countries/regions to regulate the tax allocation of cross-border digital asset transactions.
7.5 Comparison of Tax Incentives
7.5.1 Incentive Policies
Hong Kong : Focusing on "attracting capital and promoting innovation," its incentive policies are highly targeted.
Stamp duty exemption for tokenized ETFs reduces transaction costs for digital asset investment products;
Privately offered funds and family investment controlling vehicles (FOIVs) that conduct designated digital asset transactions are exempt from capital gains tax (subject to legislation in 2026), attracting institutional investors.
United States : Incentive policies focus on "charitable donations and short-term exemptions," resulting in a narrower scope.
The Wash Sale Rule does not apply to digital assets for the time being, with the exemption period ending on December 31, 2025, allowing investors to offset losses by buying and selling the same digital assets in the short term.
Donating long-term digital assets to qualified charities is tax-deductible based on their fair market value, and no capital gains tax is payable on the capital gains portion, thus encouraging charitable donations.
7.6 Conclusion on Hong Kong's Core Advantages for Digital Asset Investors
Based on a comprehensive comparison of digital asset tax administration in Hong Kong and the United States, and considering Hong Kong's unique tax system and regulatory environment, Hong Kong's core advantages for digital asset investors (individuals and institutions) can be summarized into five key areas, highlighting its unique value as a global hub for compliant digital asset investment:
The advantages of low tax burden are highlighted, maximizing investment returns: Hong Kong has no capital gains tax, and the transfer income from long-term investments in digital assets is fully tax-free. Compared with the US capital gains tax of up to 20% (28% for collectibles), this significantly increases the actual returns for investors. At the same time, there is no gift tax or estate tax, and the transfer of digital asset wealth does not require additional tax costs, which is significantly better than the US high tax exemption + high tax rate model.
Flexible tax treatment adapts to diverse investment scenarios: Hong Kong differentiates the tax treatment of digital assets according to the nature of the transaction, supporting both long-term value investment (tax-free) and regulating short-term business transactions (taxable), adapting to the needs of different entities such as individual investors, institutional investors, and professional dealers; while the United States uniformly classifies them as property, with rigid tax treatment, making it difficult to adapt to diverse investment scenarios.
Compliance costs are controllable, and the adaptation threshold is lower: Hong Kong's information reporting adopts a phased implementation model, with no mandatory information reporting requirements before 2027, allowing investors ample time to adapt to compliance; the cost basis is flexible, without the need for strict calculation on a per-wallet basis, making the operation less difficult. Compared to the mandatory reporting and strict accounting rules of Form 1099-DA implemented in the United States in 2025, Hong Kong investors face lower compliance costs and a lower adaptation threshold.
Targeted incentive policies attract long-term capital: Hong Kong has introduced targeted policies such as stamp duty exemption for tokenized ETFs and profit tax exemption for FOIV digital asset transactions (pending legislation) to precisely reduce transaction and tax costs for institutional investors, attracting long-term value capital such as private funds and family offices to settle in, and creating a high-quality investment ecosystem for investors.
Hong Kong offers favorable conditions for cross-border investment and high tax certainty: Adopting a territorial taxation principle, Hong Kong exempts investors from tax declarations on gains from overseas digital asset transactions, making it suitable for cross-border investors. Furthermore, Hong Kong is gradually improving its cross-border information exchange system and has signed double taxation agreements with multiple countries/regions, mitigating the risk of double taxation in cross-border transactions. Compared to the US's global taxation + bilateral information exchange model, cross-border investors enjoy greater tax certainty and more room for planning.
In summary, Hong Kong, with its core advantages of "low tax burden, high flexibility, strong incentives, and low compliance costs," has become a preferred destination for global digital asset investors. It is especially suitable for individual and institutional investors who pursue long-term value investing, value asset inheritance, and need cross-border deployment, ensuring compliance and security while maximizing investment returns.
