- China’s local tax authorities have begun imposing a 20% personal income tax on the investment profits of individual cryptocurrency investors and bitcoin miners.
- Within its current legal framework, China does not prohibit individuals from holding bitcoin or virtual currencies under its invalid civil law.
- Experts argue that the need to tax cryptocurrencies could force the legalization of China’s cryptocurrency industry.
Chinese journalist Colin Wu reported that Chinese authorities are planning to tax cryptocurrency companies and individuals. Experts believe China may legalize cryptocurrencies in an attempt to control crypto tax collection.
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Chinese Tax Authority Imposes 20% Personal Income Tax on Cryptocurrency Profits
Colin Wu reported that China’s local tax authorities have begun imposing a 20% personal income tax on the investment profits of individual cryptocurrency investors and bitcoin miners. China currently has strict regulations on illegal financial activities in the form of cryptocurrencies. However, based on the current situation, holding bitcoin and cryptocurrencies in portfolios is not expressly prohibited by law.
Cryptocurrency related activities are not legal in China. This poses a tax challenge. As of early 2008, there was a lot of discussion about virtual tokens in online forums and games. Wu reported that experts are of the opinion that the need to tax cryptocurrencies could force the legalization of China’s cryptocurrency industry.
While the Chinese government is cracking down on cryptocurrency trading and mining, there are signs that it is considering legalizing and regulating cryptocurrencies to give it more control and tax it. Although cryptocurrency-related activities are not legal, this raises tax issues and similar discussions took place in 2008.
In October 2021, China Tax News, a subsidiary of the State Administration of Taxation, published an article titled “Preventing Tax Risks from Virtual Currencies”. It represents the tax authorities’ stance on digital assets and their taxation.