Emily Walker
As the market experiences growth, Taiwanese financial regulators have committed to reassessing tax laws aimed at addressing tax evasion related to cryptocurrencies. Local insights indicate that these authorities may encounter challenges in establishing an effective tax framework for digital assets.
Taiwan’s Financial Regulators to Reassess Tax Laws
Taiwan’s Ministry of Finance announced plans to review tax regulations concerning crypto profits, following a recent surge in the market. Finance Minister Chuang Tsui-yun indicated in a legislative session that the agency has not yet created an efficient system for collecting taxes on digital asset gains from taxpayers.
Lawmaker Lai Shyh-bao from the Kuomintang party raised questions about the existing regulations, arguing that since cryptocurrencies fall under the category of digital assets, any profits from trading should be subject to income tax.
Sung Hsiu-ling, Director-general of the Taxation Administration, acknowledged that taxpayers are indeed obligated to report their income from crypto trading. However, Lai countered this claim, suggesting that the lack of audits means many Taiwanese investors are unlikely to report their crypto earnings.
At the hearing, Wu Lien-ying, head of the National Taxation Bureau of Taipei, noted that the current regulations enable tax collection from 26 crypto exchanges that hold anti-money laundering licenses from the Financial Supervisory Commission (FSC) of Taiwan.
According to a report by Focus Taiwan CNA, Wu had difficulty explaining the specifics of how income tax is assessed for investors trading on these platforms. Both he and Sung mentioned that the FSC is in the process of drafting a new law related to digital asset taxation, although details remain sparse.
The FSC has recently strengthened its regulatory measures for crypto exchanges, as noted by Bitrabo. These exchanges are now required to conduct thorough monitoring of the cryptocurrencies they list and implement compliance measures to prevent illicit trading.
Challenges Ahead for New Crypto Tax Regulations
Chuang and Sung have stated their intention to revisit the current tax framework in the upcoming three months to enable better taxation of cryptocurrency profits. However, a legal expert conversant with crypto matters cautioned that existing tax laws could present obstacles for the regulators.
Taiwan’s individual income tax applies only to income generated within its borders, adhering to the principle of territoriality. This implies that profits from trading digital assets offshore may be categorized differently and may not attract local taxation.
Consequently, the enforcement of strict tax laws on cryptocurrency transactions may prove challenging, particularly for individuals trading on foreign platforms who can evade taxes if their reported income falls below the $230,000 threshold set for taxable overseas income in the 2024 fiscal year.
According to my understanding, the Finance Ministry can only track the transactions linked to bank accounts, much like monitoring stock transactions. This opens up opportunities for tax evasion by presenting these trades as international operations using U.S. dollars.
Ultimately, sources suggest that updates to these regulations are essential to effectively resolve the tax evasion issues and ensure appropriate taxation of Taiwanese investors in the cryptocurrency space.