Is trading and investing in cryptocurrency legal in Taiwan? What kind of property does it belong to?
Cryptocurrency, as an emerging financial asset, does not have a mature investment environment like stocks or foreign exchange, and fraud incidents are frequent. Some banks also avoid engaging in businesses related to cryptocurrency.
When considering investing in cryptocurrency, two common questions arise: Is cryptocurrency legal? Do I have to pay taxes?
Is trading and investing in cryptocurrency legal in Taiwan? What kind of property does it belong to?
When assessing whether property is subject to taxation, the first step is to determine the category of the property and its legality.
To state the conclusion first, cryptocurrency is a legal investment product, and trading or investing in cryptocurrency is not illegal.
The regulatory authority for cryptocurrency in Taiwan is the Financial Supervisory Commission (FSC).
The FSC has been designated as the primary regulatory authority for virtual assets with financial investment or payment characteristics.
Previously, the Executive Yuan appointed the FSC as the anti-money laundering supervisory authority for “virtual currency platforms and trading businesses” under the Anti-Money Laundering Act.
Currently, the relevant legislation is the Anti-Money Laundering and Counter-Terrorism Financing Regulations for Virtual Currency Platforms and Trading Businesses, primarily focusing on KYC (Know Your Customer) and anti-money laundering measures. All cryptocurrency-related businesses in Taiwan are required to understand customer information, and large withdrawals (over NT$500,000) must be reported proactively. At present, there is a tendency to regard cryptocurrency as a type of virtual commodity; aside from the anti-money laundering legislation, there is no specific cryptocurrency law yet.
The FSC has indicated that the regulation of cryptocurrency will be implemented in four phases:
- Phase One – Registration of Virtual Asset Platforms and Trading Businesses (VSAP).
- Phase Two – Establishment of Industry Associations and Self-Regulatory Norms. The “Virtual Currency Association” in Taiwan was officially established with 24 members.
- Phase Three – Strengthening Management.
- Phase Four – Specific Legislation.
A report is expected to be submitted by the end of September this year, with a draft for specific legislation and public hearings before the end of the year. The current progress is at Phase Two, with the industry association already established.
Important: There are already legally registered businesses in Taiwan, and one should absolutely not rely on information from strangers or use unknown exchanges or trading channels.
What are the taxation standards for virtual currencies in Taiwan? Do trading and investing in cryptocurrency require tax reporting?
In the case of stocks, trading stocks in the securities market requires payment of securities transaction tax, and profits are currently exempt from securities income tax. However, cryptocurrency does not have a specific law (Securities and Exchange Act) like stocks. Currently, there is no specific cryptocurrency law, and regarding tax reporting:
For ordinary investors, buying and selling cryptocurrency:
- “Does not” require payment of transaction tax; profits are treated as income from other asset transactions (such as forex trading profits).
- “Must report” capital gains from property transactions and include them in personal comprehensive income tax.
Cryptocurrency businesses whose monthly sales exceed NT$40,000 are considered frequent traders and must complete tax registration and pay business tax and corporate income tax.
The Executive Yuan proposed legislation requiring cryptocurrency businesses to register for anti-money laundering; violators may face imprisonment of up to 2 years.
In terms of tax assessment for cryptocurrency investment, it can be broadly divided into two parts:
- Whether trading virtual currencies requires payment of transaction tax: No, similar to buying and selling foreign currency at a bank or trading in-game items online, there is no additional transaction tax, and the transaction does not need to be reported.
- Calculation method for personal income tax on virtual currency: Profits from cryptocurrency withdrawals “must be reported” for income tax.
Cryptocurrency is regarded as an asset, classified as personal property, and any profits from trading are taxable, to be reported and paid along with the individual’s total income for the year.
Capital gains from property transactions: Income Tax Act, Article 14, Paragraph 1, Category 7.
Example:
Dongdong earned NT$500,000 this year from employment with no other income. He has been investing in Bitcoin through a systematic investment plan over the past three years and decides to cash out this year at a trading platform in Taiwan, converting it to NT dollars transferred to his bank account, resulting in a profit of NT$1,000,000. His total income for the year is NT$1,500,000, and he will calculate the actual tax due based on personal deductions, joint filing with a spouse, and progressive tax rates.
Key points for tax on cryptocurrency “profits”: The timing of profit determination is based on the withdrawal.
Withdrawal refers to converting cryptocurrency “into NT dollars transferred to a bank account,” a process known in the crypto space as cashing out. Regardless of when one buys in, the time of cashing out and the profits made at that time serve as the baseline.
Capital gains/losses must be reported proactively.
This is unlike salary income, where companies report related information to the government when paying salaries, allowing automatic import of income data when filing taxes. The government does not have related data on whether transactions have been profitable; there are numerous exchanges used, and one might deposit in one and withdraw from another, making it impossible for anyone other than the individual to track trading profits accurately. Therefore, it must be reported proactively.
If there are realized trading losses, they can also be reported for deduction against some capital gains.
There are two types of income tax reporting, with most people only using one: “Comprehensive Income Tax” and “Basic Income Tax.” Comprehensive Income Tax is what most people use to report every May, while Basic Income Tax mainly applies to those with significant overseas income.
Overseas income refers to income sourced outside of Taiwan, such as rental income from properties in the United States or dividend income from U.S. stocks and bonds. Income from overseas up to NT$1,000,000 is exempt from reporting; amounts exceeding NT$1,000,000 must be reported, and if combined with other basic income exceeds NT$6,700,000, Basic Income Tax must be paid (raised to NT$7,500,000 for the next year).
Announcement from the Ministry of Finance regarding Basic Income Tax adjustments.
If Comprehensive Income Tax due > Basic Income Tax due = Pay Comprehensive Income Tax.
If Basic Income Tax due > Comprehensive Income Tax due = Pay Comprehensive Income Tax + the difference between Basic Income Tax and Comprehensive Income Tax = Basic Income Tax due.
This means paying the higher amount from the two calculations.
Frequently Asked Questions
Common questions regarding taxation of virtual currencies in Taiwan: Do C2C transactions incur tax?
Whether through any C2C platform, the result is simply converting virtual currencies into…
Cash is considered as withdrawal. Therefore, according to current regulations, if there is a profit after C2C transactions, the property transaction income must be reported actively, and declared and paid during the comprehensive income tax declaration in May each year.
Common Questions about Cryptocurrency Taxation in Taiwan: Do I Have to Pay Taxes for Selling Bitcoin?
Similar to the C2C situation mentioned above, as long as there is a “profit” after selling Bitcoin and the withdrawal is converted into cash, the property transaction income must be actively reported. Depending on the withdrawal method (converting into New Taiwan dollars at a Taiwanese exchange and transferring to a bank account > domestic income; converting into foreign currency at an overseas exchange and wiring to a foreign currency account > overseas income), there are different tax exemption amounts and calculation methods.
Common Questions about Cryptocurrency Taxation in Taiwan: Do I Have to Pay Taxes for 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 withdrawals of digital currency from MAX involve profits and are reported for taxation, relevant taxes must be paid according to income tax regulations.
Common Questions about Cryptocurrency Taxation in Taiwan: Do I Have to Pay Taxes for Withdrawals from Binance Exchange?
Similar to the situation with MAX, regardless of which exchange is involved, as long as the withdrawal is credited to an account and converted into cash, if there is a profit, relevant taxes must be paid according to income tax laws.
Cryptocurrency Tax Payment Guide
How much income tax do I need to pay? Here are three examples for your reference.
Example 1:
Dongdong has a work income of 500,000 this year, with no other income. He has regularly invested in Bitcoin for three years and this year sold all at once, converting it into New Taiwan dollars at a Taiwanese exchange and transferring to a bank account (considered domestic income), with a profit of 1,000,000. His total income for this year is 1,500,000. The actual tax amount payable will be calculated based on personal deductions, joint filing with spouse, and progressive tax rates.
Example 2:
Dongdong has a work income of 500,000 this year, with no other income. He has regularly invested in Bitcoin at an overseas exchange for three years and this year sold all at once, wiring the proceeds in US dollars back to Taiwan (considered overseas income), with a profit of 1,000,000. His total domestic income is 500,000 and overseas income is 1,000,000. The overseas income of 1,000,000 is exempt from reporting, so this year he only needs to pay comprehensive income tax on the domestic income of 500,000.
Example 3:
Dongdong has a work income of 500,000 this year, with no other income. He has regularly invested in Bitcoin at an overseas exchange for three years and this year sold all at once, wiring the proceeds in US dollars back to Taiwan (considered overseas income), with a total profit of 3,000,000. His total domestic income is 500,000 and overseas income is 3,000,000. The overseas income of 3,000,000 must be reported, while the domestic income of 500,000, after deductions, hypothetically leaves a net comprehensive income of 50,000. Since the total of 3,500,000 is below the basic tax exemption threshold of 6,700,000, there is no tax on the basic income. The domestic income of 500,000 will be taxed according to the comprehensive income tax amount.
Classification Criteria for Cryptocurrency Income Tax: New Taiwan Dollar Withdrawal or Foreign Currency Wire Transfer
Domestic income – cashing out cryptocurrency into New Taiwan dollars at a Taiwanese exchange and withdrawing to a New Taiwan dollar bank account.
Overseas income – cashing out cryptocurrency into foreign currency at an overseas exchange and wiring to a foreign currency account in Taiwan, which must be reported as “268 Sale of Foreign Virtual Assets,” and can be declared as overseas income during tax reporting.
Common Misconceptions:
X Cryptocurrency withdrawals as overseas income have an exemption amount of 6,700,000 each year X
This is incorrect information. The basic income tax has an exemption amount of 6,700,000, and the total basic income must be summed during the calculation. Unless there is absolutely no other basic income besides cryptocurrency profits, if the net comprehensive income for that year is 1,000,000, the overseas income will only have an exemption amount of 5,700,000 left.
This part is more complex, with a total of seven categories contributing to the basic income amount, among which the net comprehensive income is the most commonly encountered by the general public. The adjusted exemption amount of 7,500,000 will apply when filing taxes next year (2025).
How Can Cryptocurrency Investors Reduce Their Tax Liabilities?
For the general public, there are three main points:
1. Taxes are owed on profits from buying and selling.
Profits come from the sale income minus the purchase cost; please keep good records of purchase expenses as they can be used for cost deductions. Profits must be reported, and property transaction losses can also be reported.
2. The timing of profit determination is based on withdrawal.
No profit is counted unless there is a withdrawal. Do not convert into New Taiwan dollars; if there is no withdrawal, there is no profit. Only the part that is required for withdrawal can be used. Additionally, cryptocurrency can be used directly for payments, such as with a crypto.com credit card or online stores accepting cryptocurrency, thus avoiding the conversion into New Taiwan dollars and eliminating profit issues.
3. Overseas income enjoys a higher exemption amount.
Overseas income is exempt from reporting up to 1,000,000 per year, while all basic income has a 6,700,000 exemption amount (to be raised to 7,500,000 afterwards). With withdrawals within this exemption range, opting for overseas income (wiring foreign currency to a foreign currency bank account) can be more tax-efficient.
The above is the basic tax-saving approach for general investors. For larger investors who own companies or have other income, more advanced tax-saving strategies should be consulted with a professional accountant.
Conclusion – Cryptocurrency is Legal but Still Developing; the Environment is Not Fully Mature
Be sure to be cautious of scams.
Regarding the two initial questions:
Is cryptocurrency legal? Do I have to pay taxes?
Current status:
Investing in cryptocurrency is legal, and general investors must report property transaction income from profits, which can be calculated as comprehensive or basic income tax; crypto businesses must register and pay business tax.
Future:
We will see if any adjustments are made after the introduction of specific laws.
For first-time cryptocurrency investors, the most important thing is to avoid scams. To avoid scams, focus on two key points:
– Find reliable sources of information.
– Bookmark Daily Coin Research.
– Join the Daily Coin Research Chinese-speaking group and feel free to ask questions in the community if you have doubts.
Understand common scam methods in the cryptocurrency sector:
Investment in Bitcoin profit-making education | Detailed explanation of trend risks, scam methods, and purchasing methods.
Uncover the behind-the-scenes operations of the virtual currency scam empire! What to do if you encounter a scam? Seven common scam methods!
Essential reading for beginners: Exchange security guide | 5 steps to confirm that your exchange won’t run away with your funds!
This article is a collaborative reprint from: Daily Coin Research.