Amid a bullish market trend, Taiwanese financial authorities have promised to review tax laws to tackle cryptocurrency tax evasion. However, local reports indicate that regulators may encounter difficulties in implementing an effective digital asset tax framework.
Taiwanese authorities will review tax regulations
On Monday, the Ministry of Finance of Taiwan he promised to reconsider tax rules for cryptocurrency profits amid recent market growth. During a legislative hearing, Finance Minister Chuang Tsui-yun allegedly admitted that the agency had not yet implemented a system that would effectively collect taxes related to digital assets from individuals.
Kuomintang legislator Lai Shyh-bao questioned the existing regulations. Lai argued that cryptocurrencies are classified as digital assets in the country, which means investors who profit from trading them should not be exempt from income tax.
Taiwan Tax Administration Director General Sung Hsiu-ling explained that investors must file their income taxes properly. However, this claim was disputed by Lai, who suggested that Taiwanese investors would not feel the need to file their cryptocurrency tax reports if no authority audits them.
During the hearing, Wu Lien-ying, director general of the Taipei National Tax Bureau, added that under existing policy, corporate and corporate income taxes are collected from 26 cryptocurrency exchanges that have obtained anti-money laundering licenses from Taiwan’s Financial Supervisory Commission (FSC). . ).
According to a report by Focus Taiwan CNA, Wu “sought to provide clearer details on how income taxes are collected from investors transacting on these platforms.” Wu and Sung also revealed that the FSC is working on drafting a novel tax law for digital assets, but did not provide further details.
The FSC recently updated its regulatory framework to require cryptocurrency trading platforms to be more diligent. As Bitcoinist reports, exchanges must closely monitor and review cryptocurrency listings and withdrawals and establish measures against illegal trading.
The novel tax framework for cryptocurrencies could pose challenges
According to the report, Chuang and Sung pledged to review the current framework over the next three months to “better enable the government to tax cryptocurrency gains.” However, a legal expert familiar with cryptocurrencies told Focus Taiwan that current tax rules could pose challenges for financial authorities.
Personal income tax is levied only on income earned in Taiwan, as it is guided by the principle of territoriality. This means that if an investor earns income from irregular trading of digital assets within the country, the profits will be included in “income from real estate transactions”.
As a result, the territoriality rule could make it more complex to enforce strict tax rules on cryptocurrency transactions, as individuals transacting on foreign exchanges could avoid scrutiny if their profits remain below the foreign taxable income threshold, which has been set at $230,000 for the 2024 tax year.
As far as I know, the Ministry of Finance can only monitor the flow of currencies in bank accounts used for transactions, just as it monitors stock transactions. Taxes can be easily avoided by disguising transactions as foreign activities conducted in US dollars.
Focus Taiwan’s source ultimately suggested that these laws should be changed to address tax evasion and effectively collect cryptocurrency taxes from Taiwanese investors.
Total crypto market capitalization is at $3.03 trillion in the three-day chart. Source: TOTAL on TradingView
Featured image from Unsplash.com, chart from TradingView.com
