The Ministry of Finance has pledged to review regulations on taxing cryptocurrency gains amid surges in the digital asset’s prices following the presidential election victory of Donald Trump, a crypto supporter, on Nov. 5.
Minister of Finance Chuang Tsui-yun (莊翠雲) made the promise at a meeting of the legislature’s Finance Committee yesterday after officials admitted to Chinese Nationalist Party (KMT) lawmaker Lai Shyh-bao (賴士葆) that the agency has yet to effectively collect taxes from individuals profiting from cryptocurrency trades.
Lai said cryptocurrency is classified as a digital asset, and such assets, as defined in the Income Tax Act (所得稅法), should not be exempt from income taxes.
Photo: Fang Pin-chao, Taipei Times
Wu Lien-ying (吳蓮英), director-general of the National Taxation Bureau of Taipei, defended her bureau’s existing policy, saying it collects business and corporate income taxes from the 26 cryptocurrency exchanges that have acquired anti-money laundering registration from the Financial Supervisory Commission.
However, she struggled to provide clear details of how income taxes are being collected from investors trading on these platforms.
Taxation Administration Director-General Sung Hsiu-ling (宋秀玲) agreed with Lai that cryptocurrency gains are categorized as digital assets, and investors are required to file income taxes accordingly.
But Lai responded: “Who will file taxes if there’s no auditing?”
Eventually, at Lai’s request, Chuang and Sung vowed to review related rules within three months to better enable the government to tax cryptocurrency gains.
Wu and Sung also mentioned that the Financial Supervisory Commission was drafting a new law related to taxing cryptocurrency, but did not offer any details.
The issue was raised in light of the crypto market’s activity following Trump’s victory.
Trump has voiced support for virtual currencies and introduced a new cryptocurrency project with his three sons in late September called World Liberty Financial.
Bitcoin, the oldest and largest cryptocurrency, has surged nearly 33 percent as of yesterday since Nov. 5 to US$90,723, while dogecoin, a cryptocurrency backed by Trump supporter and Tesla Inc founder Elon Musk, has more than doubled over the same period.
A crypto-friendly climate is expected under Trump’s second presidency.
Under current Taiwanese law, individual income tax follows the principle of territoriality, meaning that income tax is only levied on income generated within Taiwan.
If an individual earns income from non-regular trading of virtual assets within Taiwan, it is categorized as “income from property transactions” under Article 14 of the Income Tax Act, with property referring to different asset classes.
The taxable income is calculated by subtracting the original acquisition cost and related expenses from the transaction price. This amount is then added to the individual’s total income and subject to taxation.
This territoriality principle, however, poses challenges for enforcing strict tax laws on cryptocurrency transactions, a legal professional familiar with cryptocurrency told CNA, speaking on condition of anonymity.
“As far as I know, the finance ministry can only monitor the currency flow of bank accounts used for transactions, similar to how it monitors stock trades,” the source said.
“Taxes can easily be evaded by disguising the transactions as overseas activity conducted in US dollars.”
The expert also noted that for individuals trading virtual currencies on overseas exchanges, even large earnings can evade scrutiny as long as the recorded gains remain below the threshold for taxable overseas income.
For this year, the threshold is NT$7.5 million (US$230,372), an increase from NT$6.7 million last year.
“At this point, I can’t imagine how they’re going to amend these regulations,” the source said.
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