Virtual currency trading is gaining traction again. On January 8, a reporter from Beijing Business Daily noticed that the Shanghai Municipal Taxation Bureau of the State Administration of Taxation recently published an article on "Common Misunderstandings of Individual Income Tax Business Income and Classified Income", which pointed out that individuals need to pay individual income tax for buying and selling virtual currencies online, which has caused heated discussions in the industry.
Although virtual currency-related transactions have been strictly suspended in China, judging from the actual investigation by Beijing Business Daily reporters in the past, a large number of individual users are still involved. In the opinion of analysts, in the past regulatory actions, although the domestic regulatory authorities denied the fiat currency attribute of virtual currency, they did not deny the property or commodity attribute of virtual currency, and according to China's existing tax law, the tax collection on the income from currency speculation has the legitimacy and legitimacy of tax collection.
The taxation of speculation is legitimate.
According to the content of the above-mentioned article, the "Reply on the Issue of Individual Income Tax on Income Obtained by Individuals from Online Buying and Selling of Virtual Currency" (Guo Shui Han No. 2008 818, hereinafter referred to as the "Reply") stipulates that the income obtained by individuals from others after purchasing the virtual currency of players through the Internet and increasing the price is taxable income of individual income tax, and individual income tax shall be calculated and paid according to the item of "income from property transfer".
A reporter from Beijing Business Daily inquired and found that the original text of the "Reply" also mentioned that the original value of the property of an individual selling virtual currency was the price paid for the acquisition of online virtual currency and related taxes. If an individual is unable to provide proof of the original value of his or her property, the in-charge taxation authorities shall verify the original value of his or her property.
However, since October 2008, the General Office of the State Administration of Taxation (SAT) has been copied and distributed by the General Office of the State Administration of Taxation, and at that time, "virtual currency" mostly referred to the medium for purchasing virtual goods and virtual services on Internet platforms, such as game currency on various online game platforms. With the advent of Bitcoin in early 2009, the number of such public virtual currencies has increased, and the concept of "virtual currency" has become broader.
It is precisely because of the time difference between the two that it is also debatable whether the virtual currency involved in the "Reply" can be equated with public virtual currency such as Bitcoin. In response to this situation, a reporter from Beijing Business Daily conducted a further interview.
Liu Honglin, the founder and lawyer of Shanghai Mankun Law Firm, told Beijing Business Daily that from the perspective of tax law, China has the legitimacy and legitimacy of tax collection on the income from currency speculation. While in-game currencies are vastly different from virtual currencies such as Bitcoin, they are currently the same in terms of legal characterization. Therefore, the income from individual transactions of virtual currency can be taxed with reference to the Reply.
Liu Honglin further explained that in the past regulatory actions, although the domestic regulatory authorities denied the fiat currency attributes of virtual currency, they did not deny the property or commodity attributes of virtual currency. Since virtual currency has property attributes, China's existing tax law can tax the transaction behavior of virtual currency. According to China's current tax law, the income tax of currency speculation may involve the payment of individual income tax.
Pan Helin, co-director and researcher of the Digital Economy and Financial Innovation Research Center of Zhejiang University International Business School, also mentioned that from the perspective of tax law, there is not much problem with the logic of taxation of currency speculation, and it is also reasonable for the income from currency speculation to be classified as property transfer. However, after the complete ban on virtual currency transactions in China, the speculation of coins has been transferred to the hidden line, and it is difficult to implement the relevant tax laws and policies at present.
The taxation process needs to be clarified.
It should be noted that this discussion is not the first time that the issue of tax payment of virtual currency transactions has attracted attention, and the taxation of virtual property, including virtual currency, has been mentioned many times in the past ten years of development.
Among them, after the issuance of the Notice on Further Preventing and Dealing with the Risk of Speculation in Virtual Currency Transactions (hereinafter referred to as the "Notice") in 2021, the China Tax News under the State Administration of Taxation published an article "Preventing the Tax Risks Brought by Virtual Currency". In judicial fields such as confiscation of fines and confiscations, restructuring and mergers and acquisitions, and bankruptcy liquidation, it is necessary to clarify the disposal methods of virtual currencies to avoid the loss of state tax revenue.
I also noticed this news, and the discussion among currency friends is very hot, after all, the correlation between the taxation of speculative coins and users is relatively high. On January 8, Xu Yang (pseudonym), a user in the currency circle, mentioned in an interview with a reporter from Beijing Business Daily.
Xu Yang bluntly said that even if the regulator once again reminded him to prevent the risk of speculation in virtual currency transactions in 2021, the virtual currency trading platform used earlier was not affected. As for the taxation of speculation, it is not a new thing in the currency circle, but it has not been effectively implemented. "If I really want to collect taxes, I am also willing, but I still need to improve the practical aspects such as calculation methods, so that users have stricter implementation reference standards. Xu Yang added.
Another blockchain researcher pointed out that the content of the earlier "Notice" emphasized the risks of overseas virtual currency exchanges and criminal activities involving virtual currency, and the effectiveness of individual transactions of virtual currency is still controversial, and the "Notice" only mentions that "any legal person, unincorporated organization and natural person investing in virtual currency and related derivatives violates public order and good customs, the relevant civil legal acts are invalid, and the losses caused thereby shall be borne by themselves". Therefore, the market is also in a wait-and-see state for the policy of taxation of currency speculation.
Pan and Lin said that first of all, it is necessary to clarify the nature of virtual currency transactions carried out by individuals in China, and if it is completely prohibited, it will not involve paying taxes under the principle of territoriality, otherwise it will be necessary to improve the taxation of specific transaction scenarios.
In Liu Honglin's view, if the tax department wants to collect taxes on virtual currency transactions, there are many legal and policy issues to be solved, among which the legality basis of taxation and the standard of taxation amount need to be clarified. On the other hand, based on the particularity of virtual currency transactions, it is also necessary to clarify whether the investment income is measured according to the currency standard or the fiat currency standard.
Reasonable tax planning.
In the disturbing discussions, a reporter from Beijing Business Daily noticed that on January 8, the Shanghai Municipal Taxation Bureau of the State Administration of Taxation had deleted the original article, and it was no longer possible to view it as of press time.
In the discussion on the taxation of coin speculation, there are also fans in the currency circle who believe that this is a signal of "legalization of coin speculation". However, another legal source pointed out that the above-mentioned article is just an ordinary popular science tweet by the Shanghai tax department, which aims to increase the tax knowledge of citizens and friends, including unconventional and bizarre tax knowledge, and should not over-interpret the policy trend.
In the "China Financial Stability Report (2023)" released by the People's Bank of China (PBoC), a definition of crypto assets is given - crypto assets refer to private sector digital assets that mainly rely on cryptography, distributed ledger or similar technologies for development and operation, creating new asset forms and business models. Crypto assets are not issued by monetary authorities, do not have monetary attributes such as legal compensation and compulsion, and are not subject to supervision appropriate to the substance of their business, thus showing dual risks of financial and digital technology. At the same time, China has already carried out a clean-up and rectification of risks related to the field of crypto assets earlier.
To be clear, the risk of speculating on virtual currencies is not diminished by legal taxation. Pan and Lin believe that domestic users should not take chances and try to stay away from such high-risk speculative activities.
Liu Honglin suggested that it would not be wrong for users in the currency circle to make reasonable tax planning in advance. However, there are many and complex tax-related laws and regulations, and the calculation of the income from virtual currency transfer has not yet been conclusive. Therefore, if an individual is involved in the transfer of virtual currency, it is recommended to communicate with professionals in advance and plan in advance. Avoid unnecessary troubles caused by failure to declare tax in time or form tax obligations in many places due to failure to declare in time or form tax obligations in many places.
Beijing Business Daily reporter Liao Meng.