Why start paying attention to the taxation of Virtual Money?

As the activity level of the Virtual Money market continues to rise, the Ministry of Finance and tax authorities in Taiwan (hereafter referred to as Taiwan) have begun to gradually strengthen the regulation of crypto assets. The trading of virtual assets has characteristics such as cross-border, high-frequency, and opacity. If not regulated, it can easily become a loophole for tax evasion.

In addition, in order to align with international standards, Taiwan also intends to strengthen anti-money laundering and reporting systems for virtual assets, and impose taxation on profit-making activities.

Are virtual assets taxable items?

Currently, Taiwan does not have an independent tax law specifically for “Virtual Money,” but the Ministry of Finance has incorporated it into the existing framework of the Income Tax Act.

• Nature of Securities: If a project is recognized as having the characteristics of securities, it may be subject to capital gains tax, income tax, and other taxes.
• Non-securities nature: Most virtual money transactions are classified as “property transaction income” and must be reported for tax purposes.

In other words, even if no specific tax regulations are established, as long as there is a profit, it constitutes a taxable activity under the current tax law.

2024 Case Supplement Explanation: Tax authorities have taken action.

According to chain media ABMedia, the Taiwan Ministry of Finance and the National Taxation Bureau seized several cases of “short reporting” of Virtual Money trading income by the end of 2024:

• The total amount of short reporting is approximately NT$ 129 million.
• The total amount of tax payment and fines exceeds 34 million yuan.
• The subjects of the survey include individual investors and professionals related to virtual assets.

This indicates that, even though Taiwan has not yet established specific laws, the National Taxation Bureau can already collect taxes based on existing regulations.

Classification methods and tax bases of the Ministry of Finance

The Ministry of Finance pointed out that virtual assets are primarily classified based on their functions and trading nature. For example:

• The difference in buying and selling virtual money → counted as income from property transactions.
• DeFi or staking interest → may be classified as other income.
• Mining, airdrop tokens → belong to income and should be recorded at their market value at the time of acquisition.

All types of transactions will be judged for tax purposes based on whether they bring about property benefits.

Taxable situations that investors should pay attention to

Taxable activities related to Virtual Money include:

1. Buying and selling cryptocurrencies: For example, buying low and selling high BTC, ETH, the profits obtained belong to property transaction income.
2. On-chain exchange or payment: exchanging coins for fiat currency or goods, and any price difference also constitutes taxable income.
3. Mining and airdrop receipts: What you obtain now should be listed as income.
4. Staking, liquidity mining, lending and other DeFi earnings: It is highly likely to be included in the tax scope in the future.

Taxation Practices and Suggestions

It is recommended that investors start from now:

• Complete transaction records: including coin type, time, amount, platform, and fees.
• Convert to TWD and summarize annually: tools such as CoinTracking and Koinly can be used.
• Attention to Income Category Classification: Understand which behaviors belong to which taxable items.
• Consult professionals or declare platform assistance: improve accuracy and compliance.

Draft Law and Future Direction of Regulation

The Ministry of Finance and the Financial Supervisory Commission have drafted the “Virtual Asset Management Special Act” to be submitted to the Executive Yuan for review in mid-2025, focusing on:

• Establish a registration system for virtual asset platforms within Taiwan.
• Strengthen the anti-money laundering and tax information reporting mechanism.
• Promote tax transparency and automatic information exchange mechanisms.

Once this law is passed, it will significantly enhance the ability of tax authorities to obtain information, bringing stronger compliance pressure on investors.

Summary

Although Taiwan has not yet established a dedicated tax system for virtual assets, the Ministry of Finance and the National Taxation Bureau have gradually incorporated it into the existing legal framework for management, and there have been actual cases of tax supplements. Investors should not be complacent; they should organize their asset records early, understand the taxation logic, and pay attention to the upcoming management regulations to comply with tax obligations and mitigate risks.