Amid the market’s bullish run, Taiwan’s financial authorities vowed to overhaul tax rules to tackle the country’s crypto tax evasion problem. However, local reports noted that regulators may face difficulties in implementing an effective tax framework related to digital assets.
Taiwanese authorities will revise tax laws
The Taiwanese Ministry of Finance announced this on Monday promised to revisit tax regulation regarding crypto gains during the recent market rally. During a legislative hearing, Finance Minister Chuang Tsui-yun reportedly admitted that the agency has yet to implement a system that effectively collects digital wealth-related taxes from individuals.
Kuomintang lawmaker Lai Shyh-bao questioned the current regulations. Lai argued that cryptocurrencies are classified as digital assets in the country, meaning investors who profit from their trading should not be exempt from income taxes.
Taiwan’s Director General of Tax Administration Sung Hsiu-ling explained that investors must submit income taxes accordingly. However, this claim was disputed by Lai, who suggested that Taiwanese investors will not feel the need to file their crypto tax reports if no authority checks them.
During the hearing, Wu Lien-ying, the director general of Taipei’s National Taxation Bureau, added that the existing policy collects corporate and corporate taxes from 26 crypto exchanges that have obtained anti-money laundering licenses from Taiwan’s Financial Supervisory Commission (FSC). ).
According to Focus Taiwan CNA’s report, Wu “struggled to provide clearer details on how income taxes are collected from investors trading on these platforms.” Wu and Sung also revealed that the FSC is drafting a new tax law on digital assets, but did not provide further details.
The FSC recently updated its regulatory framework to require stricter due diligence of crypto trading platforms. If reported by Bitcoinist, exchanges must closely monitor and assess the listing and delisting of cryptocurrencies and take measures against illegal trading.
A new crypto tax framework may face challenges
According to the report, Chuang and Sung pledged to revise the current framework within the next three months to “enhance the government’s ability to tax cryptocurrency profits.” However, a legal expert familiar with crypto told Focus Taiwan that current tax laws could pose challenges for financial authorities.
Individual income tax is only imposed on income generated within Taiwan because it follows the territoriality principle. This means that if an investor earns income from non-regular trading of digital assets within the country’s territory, the profits are categorized as ‘income from real estate transactions’.
As a result, the territoriality principle could make enforcing strict tax laws on crypto transactions more difficult as individuals trade abroad exchanges could escape scrutiny if their profits fall below the taxable foreign income threshold, which was set at $230,000 for the 2024 fiscal year.
As far as I know, the Treasury Department can only monitor the flow of currency from bank accounts used for transactions, similar to the way it monitors stock trading. Taxes can easily be evaded by disguising the transactions as foreign activities in US dollars.
Focus Taiwan’s source ultimately suggested that these regulations should be changed to address the problem of tax evasion and effectively collect crypto 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