Taxation of Virtual Money: Compliance Challenges and Strategies in the New Normal of Investment

The Importance of Taxation on Virtual Money

Virtual money is recognized as an asset or property by tax authorities in multiple countries due to its trading price differences and profit nature. Profits generated during trading, exchanging, and holding must be taxed according to the law. This move not only closes tax evasion loopholes but also helps to regulate market behavior and protect the rights and interests of the investing public.

Overview of Major Global Taxation Policies

The United States regards virtual money as property and imposes capital gains tax on transaction gains, mining income, and airdrops. Japan, on the other hand, levies a progressive tax rate on personal income, which can go up to 55%. Singapore has no taxes on personal holdings, but businesses are required to pay taxes. China has not yet unified its tax standards, but regulations are tightening. Taiwan (hereinafter referred to as Taiwan) does not have specific laws, but has tightened governance through tax audits and supplementary reporting mechanisms.

Current Situation of Taxation on Virtual Money in Taiwan

The Ministry of Finance in Taiwan categorizes virtual money as "property transaction income," requiring all withdrawals that realize profits to be declared for comprehensive income tax. By the end of 2024, the tax bureau discovered over NT$130 million in short reports, resulting in additional fines exceeding NT$34 million. Income from staking and DeFi yields may also fall under the tax scope in the future, and it has entered a strict audit phase.

Common Types of Taxation and Risks

Including gains from buying and selling, profits from payments and exchanges of fiat currency, mining and airdrop income, as well as the increasingly common staking and DeFi interest. Investors may face back taxes, fines, or even legal liability if they fail to report in a timely manner.

Tax filing process and Compliance suggestions

The focus is on keeping a complete record of each transaction's information, including time, coin type, and price converted to the local currency, etc. Tools like CoinTracking and Koinly can be used to assist in generating tax reports. When necessary, seek assistance from professional accountants or tax advisors to ensure transparent reporting and avoid tax risks.

Preventing Tax Reporting Pitfalls

Common misconceptions include the belief that taxation is not required as long as it is not realized, reliance on unreported information from exchanges, ignoring airdrop and NFT earnings, and the notion that cross-border transactions do not need to be reported. In reality, whether or not holdings are liquidated, profits are considered taxable income, and the principle of worldwide income applies equally.

Summary

Taxation of Virtual Money is becoming a basic requirement for industry Compliance, and investors should not harbor any illusions. Through timely and complete records and declarations, legal taxation not only protects one's rights and interests but also benefits the long-term healthy development of the market. Keeping an eye on policy changes and using professional tools is key to achieving compliant investment.