Is it legal to buy, sell and invest in cryptocurrency in Taiwan?
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 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 the 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 the bill.
The Financial Supervisory Commission 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 money laundering prevention statementsThe second stage - establishment of industry associations and self-discipline standards
Taiwan’s “Virtual Currency Association” was officially established: 24 players joined the membership | BlockCastThe third stage - strengthen management
The fourth stage - the special law is expected to submit a report by the end of September this year, and propose a draft of the special law and hold a public hearing 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.
An inventory of the licenses, compliance status, and security of 7 Taiwan virtual currency exchanges
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 ordinary 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 " must be reported " and are incorporated into the personal comprehensive income tax.
Currency merchants whose main business is buying and selling cryptocurrencies and whose monthly sales exceed NT$40,000 are considered regular trading currency merchants and must complete tax registration and pay business tax and income tax.
No transaction tax on buying and selling cryptocurrencies
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.
Cryptocurrency profits require income tax returns
Cryptocurrency is regarded as an asset and is personal property. Profits from transactions must be taxed and included in the personal comprehensive income for that year and declared and paid together.
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 paying taxes on cryptocurrency profits:
The profit timing is determined based on exit <br>Exit refers to "liquidating cryptocurrency into Taiwan dollars and transferring it to a bank account". This action is called withdrawal in the crypto. 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 need to be reported proactively <br>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 import the income information when filing taxes; whether the transaction There is profit, but the government does not have relevant information. There may be many exchanges that people use. This one deposits money and that one withdraws money. No one except you can accurately grasp the transaction profit, and you cannot automatically remit it. 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.
How much tax do you have to pay? Tax payment tips for lazy people - 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.
Overseas income of 3 million must be declared, and domestic income of 500,000 is assumed to leave a total net income of 50,000 after calculating deductions. The total of 3.05 million is lower than the basic income tax exemption of 6.7 million. The basic income tax is calculated in a tax-free manner.
The 500,000 portion of domestic income is subject to comprehensive income tax.
Criteria for judging the type of income: Taiwan dollar withdrawal or foreign currency wire transfer
Domestic Earnings - 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. It can be declared as overseas income when filing taxes.
Common myths:
X Cryptocurrency withdrawals with overseas income are exempt from tax of 6.7 million per year
This is wrong information. The basic income tax has a tax exemption of 6.7 million. The total basic income must be added when calculating, unless there is no other basic income except cryptocurrency profits. If the net comprehensive income for the year is 1 million, the overseas income will only be 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 tax exemption limit of 7.5 million will apply when filing taxes next year (2025).
How to save taxes when investing in cryptocurrency?
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 good record of 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 ordinary 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 - Cryptocurrency is legal but still developing. The environment is not yet fully mature, so 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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