Taxation Regarding Crypto Assets Transaction in Taiwan
Currently, there are still many ambiguities in terms of taxation regulations for virtual currencies. The Taiwan Financial Supervisory Commission has not yet proposed any regulation for various coins. However, virtual currency trading platforms are an intermediary service provider for buyers and sellers, and the main income of such platforms is primarily through transaction fees, and the "listing fee" of the virtual currency issuer.
A virtual currency exchange operator provides a matching service between buyers and sellers. The main income of the transactions include handling fees (buy, sell, and receive currency) paid by both parties for the transaction, as well as the listing fee paid by the currency issuer. Some foreign exchange operators have also launched their own platform coins, for example: Binance launched BNB, Huobi has HT.
Taiwan’s taxation regulations for virtual currencies are still unclear. For example, the nature of various virtual currencies has not yet been confirmed. However, the taxation method for platform service fees charged from buyers and sellers by platform operators are as follows:
1. Business operation: Regardless of whether the trading platform is foreign or domestic, the income from transaction fees is considered sales of labor services in Taiwan and is subject to Value Added Tax (VAT). However, if it is a domestic platform business, the VAT can be calculated on a net service income basis.
2. Profit-seeking Enterprise Income Tax (Corporate Income Tax):
i. The income from service fees charged by a Taiwan virtual currency trading platform from buyers and sellers inside and outside of Taiwan should be included in the income of the current year, and file for income tax in May of the following year.
ii. For foreign companies that provide a trading platform for domestic and foreign buyers and sellers in Taiwan, if the buyer and seller, or one of them is an individual or profit-seeking enterprise in Taiwan, the platform service fee is also considered a source of income in Taiwan, and taxes are withheld in accordance with the relevant regulations from Income Tax on the sales income of cross-border electronic services. After withholding according to the total amount, companies may apply to claim related costs or expenses, or claim tax refund based on the assessed net profit rate and contribution.
Issues regarding virtual taxation may be due to the fact that servers, transaction parties and platform operators may be located in different taxation areas, which in turn lead to disputes over tax jurisdiction between countries. Virtual currencies keep relevant transaction records through decentralized ledgers, and transaction locations may add more variables.
The establishment of foreign virtual currency exchanges in countries that have not yet signed a tax treaty with Taiwan may add to the difficulty of correct tax filing and tax payment. There are still many tax issues that need to be addressed, discusses, and regulated in the era of crypto economy.