Recently, the Shanghai Taxation Bureau of the State Administration of Taxation issued a document "Common Misunderstandings of Individual Income Tax Business Income and Classified Income" in Shanghai Taxation, which pointed out that individuals need to pay individual income tax for buying and selling virtual currencies online.
This article caused an uproar among friends in the circleI am not only worried about the loss of income due to tax payment in the future, but also worried that the tax bureau will conduct a tax audit on the previous income.
Maybe Mankiw's friends don't have to be overly nervous.
It's just a tweet of knowledge
This article on Shanghai Taxation is just an ordinary popular science tweet in their fixed "Knowledge" column, which aims to increase tax knowledge for citizens and friends, including unconventional and bizarre tax knowledge. Immediately after the question of whether individuals need to pay individual income tax for buying and selling virtual currencies online, the content is "Individuals need to pay individual income tax when they obtain online red envelopes". The strange question and answer that you have to pay personal income tax for receiving online red envelopes makes the question and answer of paying personal income tax for buying and selling virtual currencies seem weird. I have to make people wonder, is the virtual currency that Shanghai tax said is the virtual currency understood by friends in the circle or the game currency such as QQ coin?
But what is clear is that this article on Shanghai Taxation is not an official document. It may even be that I read the article "Do Chinese Citizens Need to Pay Taxes on Transactions of Virtual Currencies?" by lawyer Mankunkin on October 17, 2023or ** generated editorial thoughts. 
Do you have to pay taxes for speculation?To get back to the point, regardless of whether the issuance of Shanghai tax is unintentional or intentional, and regardless of the policy direction,From the perspective of laws and regulations, does the state have the legitimacy and legitimacy to levy taxes on the income from currency speculation?Some.
Whether it is the Notice on Preventing Bitcoin Risks (Yinfa [2013] No. 289) (hereinafter referred to as "Document No. 289") issued by five ministries and commissions including the People's Bank of China, the Announcement on Preventing Risks of Token Issuance and Financing issued by the People's Bank of China and other seven ministries and commissions on September 4, 2017 (hereinafter referred to as the "Announcement 94"), or the Notice on Further Preventing and Handling the Risk of Speculation in Virtual Currency Transactions (hereinafter referred to as "Circular No. 289") issued by ten ministries and commissions including the People's Bank of China on September 24, 2021 (hereinafter referred to as "Circular No. 289") 924 Notice").Although the state has denied the fiat currency attribute of virtual currency, it has not denied the property or commodity attribute of virtual currencySince virtual currency has property attributes, China's existing tax law can tax the transaction behavior of virtual currency
According to the current tax law of our country,The income generated by the transfer of virtual currencies such as bitcoin by individuals may be taxed to individualsIncome tax
According to the Individual Income Tax Law of the People's Republic of China and the Regulations for the Implementation of the Individual Income Tax Law of the People's Republic of China, income from property transfer is subject to individual income tax. In addition, according to the currently effective "Reply of the State Administration of Taxation on the Levy of Individual Income Tax on Income Obtained by Individuals from Online Buying and Selling Virtual Currencies" (Guo Shui Han No. 2008 818), 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 should be followed"Income from the transfer of property"The project calculates and pays individual income tax.
AlthoughIn-game currency is very different from the virtual currency referred to in this article, but at the moment they are no different in terms of legal characterization. Therefore, the income from the trading of virtual currency by individuals can be taxed with reference to the National Tax Letter 2008 818
Can the tax audit period be indefinite?One of the same concerns of Mankiw's friends is what to do if the tax office goes over old accounts and asks for taxes on previous virtual currency transactionsCan the IRD recover taxes indefinitely?No.
The tax law stipulates the period of recovery. On the one hand, the reason for setting the time limit for recovery is to urge the tax authorities to exercise their powers in a timely manner and implement the principle of administrative efficiencyOn the other hand, it is to give taxpayers a reasonable expectation, which is the embodiment of tax certainty, so as to ensure the stability of the legal order. However, in the case of tax evasion, tax resistance and tax fraud, the tax authorities can pursue tax indefinitely. In the scenario of virtual currency transactions, under the current circumstances, lawyer Mankunkin believes that there is no tax evasion, tax resistance, or tax fraud. BecauseThe current judicial practice is ambiguous or even negative in the legal evaluation of virtual currency transactions, and taxpayers do not have definite expectations on whether to pay taxes, so there is no subjective intention to steal, resist or cheat taxes, and the reasons for not paying taxes can only be attributed to the responsibility of the tax authorities.
According to the first paragraph of Article 52 of the Law of the People's Republic of China on the Administration of Tax Collection (2015 Amendment), "if a taxpayer or withholding agent fails to pay or underpays the tax due to the responsibility of the tax authority, the tax authority may require the taxpayer or withholding agent to pay the tax back within three years, but shall not impose a late payment penalty". and Article 83 of the Detailed Rules for the Implementation of the Law of the People's Republic of China on the Administration of Tax Collection (2016 Revision), which states that "the time limit for making up and recovering taxes and late fees shall be calculated from the date on which the taxpayer or withholding agent should pay the unpaid or underpaid tax." "Failure to pay or underpayment of tax due to the responsibility of the tax authoritiesThe tax authorities shall conduct a tax audit in a timely manner within three years from the date of expiration of the tax payment period. Otherwise, the taxpayer has the right to refuse the tax audit on the grounds that the recovery period has expired.
Attorney Mankiw advisesPolicies may change every dayBut compliance should be changing. Paying taxes is an honorable thing, but for taxpayers, they only pay what they should pay. In summary, there are three things to keep in mind for Mankiw's friends:
From the perspective of tax law, the state has the legitimacy and legitimacy to levy taxes on the income from currency speculation. If the tax is not paid or underpaid due to the responsibility of the tax authorities, the recovery period of the tax authorities is only 3 years. There's never a wrong thing to do with proper tax planning.
The original author of this article is lawyer Jin Jianzhi.
