How much tax do you pay when buying and selling Bitcoin domestically?

Will cryptocurrencies be taxed? At some point in the uncertain future, yes. However, how much and how to collect may require solving a series of complex issues, and then on the basis of coordination between various departments, the tax department will issue policies that can truly be implemented.

On January 3, 2024, the Shanghai Taxation Bureau of the State Administration of Taxation issued an article on the public account "Common Misunderstandings about Personal Income Tax Business Income and Classified Income", which stated : Individuals who buy and sell virtual currencies through the Internet need to pay personal income tax.

Does paying taxes on virtual currencies mean that virtual currency transactions will be legal in our country in the future? Has the country recognized virtual currency? Will the tax bureau check my previous accounts? How much back tax do I have to pay?

Do I have to pay tax when buying and selling virtual currencies? ——Shanghai Taxation Bureau issued a document explaining

1. Do I need to pay personal income tax when buying and selling virtual currencies?

The original text of the Shanghai Taxation Release, which excited friends in the currency circle, is as follows:

Myth 3: Individuals buying and selling virtual currencies online do not need to pay personal income tax.

correct. Personal income tax needs to be paid.

The "Reply on the Collection of Personal Income Tax on Income Obtained by Individuals from Buying and Selling Virtual Currency Online" (Guo Shui Han [2008] No. 818) stipulates that individuals acquire players' virtual currencies through the Internet and sell them to others at a markup. Income is taxable income for personal income tax, and personal income tax should be calculated and paid according to the "income from property transfer" item.

First of all, in terms of time, the legal basis for the questions and answers in the original article is the "Reply of the State Administration of Taxation on the Collection of Personal Income Tax on the Income Obtained by Individuals from Online Trading of Virtual Currencies" that came into effect on September 28, 2008. 》, When did Bitcoin come into existence? ——Proposed by Satoshi Nakamoto on November 1, 2008, and born on January 3, 2009.

From a time perspective, it is obvious that the person who drafted the regulations would not have known the fresh concepts of Bitcoin and Tether at that time.

Secondly, in terms of content, “individuals acquire players’ virtual currency through the Internet.” Obviously, this refers to the game currency of players on the game platform. Game currency is also “virtual currency”. Friends in the currency circle have forgotten ?

So, the meaning of this approval is that the income from buying and selling game currency belongs to the "property transfer income" in personal tax and is subject to tax. It has nothing to do with Bitcoin.

2. How far is it before Bitcoin is taxed?

It is only a matter of time before the country taxes cryptocurrencies (to distinguish them from game virtual currencies, they are all referred to as cryptocurrencies below). The main reasons are as follows:

1、Is there any basis for taxing cryptocurrency?

Since 2013 to the present, relevant departments in my country have issued a series of documents on cryptocurrency. Among them, according to the notice of five ministries and commissions in December 2013, Bitcoin is characterized as a virtual commodity and cannot be used as currency in the market. According to Announcement 94 of 2017, trading of cryptocurrencies between individuals is not prohibited. In subsequent articles, these two views have never been denied.

According to Article 2 of the "Personal Income Tax Law", the following personal income shall be subject to personal income tax: "(8) Income from property transfer". Cryptocurrency transactions between individuals, such as U-businessmen who buy low and sell high to make a profit on the price difference, or ordinary currency speculators, are not entitled to income from property transfer in the individual tax law.

2. For our country, if there is a tax, what are the pros and cons?

Before the country promulgates relevant policies and regulations, it will inevitably fully consider the pros and cons of this decision. So for our country, what are the advantages and disadvantages of taxing cryptocurrency? ——This determines whether cryptocurrency taxation will be implemented domestically in the future.

3. What is the understanding of cryptocurrency in other countries?

Tough questions, you might as well see how others deal with them. If you want to impose taxes, you can also refer to the practices of other countries.

As early as 2014, the IRS issued Notice 2014-21, which clarified how cryptocurrencies are taxed. In April 2017, the Japanese government revised the Fund Settlement Act, recognizing Bitcoin as a legal payment method and formulating a series of standards and rules for exchanges. On February 22, 2021, according to South Korea’s Ministry of Strategy and Finance, the South Korean government will tax income from cryptocurrencies and other virtual assets exceeding 2.5 million won within one year at a tax rate of 20% starting next year (but it does not seem to have been implemented yet).

In short, the value of cryptocurrency has been recognized by many mainstream countries, but there are different qualitative distinctions. For example, it is positioned as a commodity, digital asset, electronic certificate with economic value, currency payment method, securities, etc. wait. Regarding taxation, some countries have also formulated relevant plans.

Policies may change every day, but compliance should be used to respond to changes. Paying taxes is an honorable thing, but for taxpayers, they only pay the taxes they should pay.

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