The attitude of Taiwan towards cryptocurrency assets exhibits a characteristic of both openness and caution.

Written by: FinTax

1. Introduction

The attitude of Taiwan towards cryptocurrency assets exhibits a characteristic of both openness and caution. In recent years, the use and trading of cryptocurrency assets in Taiwan have gradually increased, with financial institutions and related enterprises becoming more involved. Taiwan recognizes the high speculative nature of the cryptocurrency asset field and its potential risks of money laundering and terrorist financing, thus taking progressively improved measures in regulation. The Financial Supervisory Commission of Taiwan (hereinafter referred to as "FSC") actively promotes the standardized management of Virtual Asset Service Providers (VASP) by issuing relevant policies in accordance with market dynamics. In terms of taxation, the Taiwanese government is gradually clarifying its tax policies on cryptocurrency assets, aiming to avoid excessive market intervention while striving to provide a fair and transparent tax environment.

2. Basic Tax System in Taiwan

Taiwan has a total of 19 types of taxes, which can be divided into "national taxes" and local taxes (taxes of municipalities and counties) based on the ownership of tax revenue rights. According to the current tax laws in Taiwan, among various "national taxes," customs duties are collected by the Ministry of Finance's Customs Administration, while others are managed by the National Taxation Bureau; local taxes are managed by the tax authorities of each municipality and county. This article briefly outlines the income tax, business tax, and securities transaction tax related to cryptocurrency assets as follows.

2.1 Income Tax

The Income Tax Act is the basic law for the collection of income tax in Taiwan, which divides income tax into comprehensive income tax and profit-seeking enterprise income tax. Taiwan's comprehensive income tax can be compared to individual income tax in mainland China, taxing individuals on various incomes over a certain period (usually one year), including salary income, interest income, dividend income, rental income, and capital gains. The tax base is the taxpayer's net comprehensive income for the year, which is the total income minus exemptions, deductions, and special deductions. Resident taxpayers must file their comprehensive income tax returns from May 1 to May 31 of the following year, and must combine the income, exemptions, and deductions of their spouse and dependents in the declaration.

In terms of tax rates, Taiwan's comprehensive income tax adopts a progressive tax rate, divided into four brackets: 5%, 12%, 20%, 30%, and 40%. Additionally, the exemptions, standard deductions, special deductions for salary income, special deductions for disabilities, tax brackets, and the calculation of the exempt amount for retirement income are adjusted according to the Income Tax Act whenever the consumer price index rises by 3% or more compared to the last adjustment year. In 2025, the exemption amount for Taiwan's comprehensive income tax is 97,000 New Taiwan Dollars.

Taiwan's profit-seeking enterprise income tax can be compared to corporate income tax in mainland China, taxing the profit income of taxpayers within an accounting year. However, the taxpayers include not only corporate entities but also sole proprietorships, partnerships, and cooperatives, making the scope broader. According to the Income Tax Act of Taiwan, all profit-seeking enterprises operating within Taiwan, whether public, private, or public-private partnerships, must pay profit-seeking enterprise income tax if they are for profit and have a business license or operating location. The tax base for profit-seeking enterprises is the net profit after deducting various costs, expenses, losses, and taxes from their total revenue for the year.

In terms of tax rates, income below 120,000 New Taiwan Dollars is exempt from tax, while income between 120,000 and 200,000 New Taiwan Dollars is taxed at 50% (only on the portion exceeding 120,000), and income above 200,000 New Taiwan Dollars is taxed at 20%.

2.2 Business Tax

The Value-Added and Non-Value-Added Business Tax Act (hereinafter referred to as the "Business Tax Act") is the basic law for the collection of business tax in Taiwan, which divides business tax into value-added business tax and non-value-added business tax. The taxable scope includes the sale of goods, provision of services, and import of goods.

Taiwan's value-added business tax is based on the value added during the sale of goods or services, meaning it is taxed on the difference between sales and purchases, with the current value-added business tax rate set at 5%. Starting in 2025, the threshold for services is 50,000 New Taiwan Dollars, and for goods, it is 100,000 New Taiwan Dollars. Additionally, the Business Tax Act has special provisions for zero-rated items, foreign tax refund items, exemptions from value-added business tax, and refunds of overpaid taxes. Businesses, unless otherwise specified by the Business Tax Act, must declare their sales and the amount of business tax payable or overpaid every two months within 15 days of the start of the next period.

Taiwan's non-value-added business tax, also known as gross business tax, is based on the gross amount of sales of goods or services, meaning it is taxed on the total sales amount. According to the Business Tax Act, the scope of non-value-added business tax includes the financial industry, special catering industry, small-scale businesses, and businesses exempted from declaring sales amounts as specified by the Ministry of Finance, with declarations made every two months. Those with payable business tax must first pay it to the public treasury and then declare it along with the payment receipt. However, small-scale businesses and those exempted from declaring sales amounts are assessed by the tax authorities, and tax payment notices are issued every three months.

2.3 Securities Transaction Tax

The Securities Transaction Tax Regulations are the basic law for the collection of securities transaction tax in Taiwan, levied on the seller based on the transaction price. The taxable scope includes securities, namely bonds issued by various levels of government, stocks issued by companies, and other securities approved for public offering by the government. In terms of tax rates, the tax rate for stocks issued by companies and certificates or vouchers indicating stock rights is 3‰, while the tax rate for corporate bonds and other government-approved securities is 1‰.

3. Overview of Taiwan's Cryptocurrency Taxation and Regulatory System

3.1 Taiwan's Definition of Cryptocurrency Assets

In Taiwan, the scope of cryptocurrency assets is consistent with that of virtual assets. This article uniformly uses the term cryptocurrency assets but retains the original names of relevant regulations. Taiwan's definition of cryptocurrency assets includes two categories: securities and virtual goods, which do not conflict with each other. The classification of securities comes from a directive issued by the FSC in 2019, which determined that cryptocurrency assets with securities characteristics are classified as securities. The characteristics of securities include "liquidity," "investor investment," "derived from the same common enterprise or plan," "investor's expectation of profit," and "profit primarily dependent on the efforts of the issuer or a third party." Cryptocurrency assets are defined as "value that can be digitally stored, exchanged, or transferred using cryptography and distributed ledger technology or other similar technologies." In a press release from the FSC in 2024 titled "FSC Urges the Public to Carefully Assess the Risks of Virtual Asset Trading," cryptocurrency assets are defined as "highly speculative digital virtual goods, not currency, and have no intrinsic value, with no limits on price fluctuations." We believe that the relationship between these two definitions is that ordinary cryptocurrency assets belong to virtual goods, while those with securities characteristics belong to securities.

3.2 Overview of Taiwan's Cryptocurrency Taxation System

3.2.1 Income Tax

Both individuals and enterprises must pay income tax on profits from cryptocurrency trading, and losses from cryptocurrency trading can also be deducted before tax. Specifically, ordinary enterprises calculating income tax on cryptocurrency assets should follow general financial accounting principles, treating profits from cryptocurrency trading as revenue, aggregating them annually, and calculating the taxable amount according to relevant Taiwanese tax laws. Cryptocurrency trading platforms calculate their income tax based on service income (platform fees and transaction commissions) after deducting costs, with a tax calculation method similar to that of traditional service industries. For individual investors, they should include cryptocurrency trading profits in their capital gains and calculate the income tax payable.

In practice, since tax authorities can only track the funds for buying and selling without detailed transaction data, it is impossible to clearly determine the buying and selling prices and quantities as in centralized trading markets for securities, making it difficult to calculate the income from each transaction in detail. Therefore, income from cryptocurrency trading can only be calculated when funds are withdrawn from the exchange to the investor's account, with costs calculated solely based on the incoming funds, i.e., the initial funds transferred from the investor's account to the exchange. This calculation method has its unreasonable aspects; for example, in cases where not all cryptocurrency assets are sold, how to calculate the cost of the sold cryptocurrency assets—whether to use specific identification, first-in-first-out, or weighted average methods—currently lacks official regulations.

3.2.2 Business Tax

Frequent buying and selling of cryptocurrencies often involves business tax issues in tax administration. The sales tax group of the National Taxation Bureau of Taipei responded in an online discussion: "According to the Ministry of Finance's directive No. 10904512340 dated January 31, 2020: '2. Individuals trading virtual currencies online should verify the nature of the currency based on the facts of the case. If it is a general digital good (service) and the monthly sales reach the business tax threshold (sales of goods are 100,000 New Taiwan Dollars), they should register for tax and pay business tax according to the above regulations; if it is a payment tool, it is not subject to business tax.' Thus, when cryptocurrency is sold as a general digital good or service and meets the threshold conditions, business tax should be paid."

Specifically, if the seller is a commercial entity in Taiwan, they must pay 5% value-added tax on their income; if the seller is an individual in Taiwan, the individual must apply for tax registration and pay 5% value-added tax on their income unless their monthly sales are below 50,000 New Taiwan Dollars; cryptocurrency trading platforms must charge 5% business tax on all service fees.

3.2.3 Securities Transaction Tax

Transactions involving cryptocurrency assets with securities characteristics are subject to securities transaction tax. The regulations related to Security Token Offerings (STO) are relatively complete in Taiwan, and issuers must comply with special laws for cryptocurrencies, such as the "Guidelines for the Disclosure of Information Required for the Public Offering of Virtual Currency with Securities Characteristics at Securities Firms" and the "Management Regulations for Securities Firms Engaging in the Trading of Virtual Currency with Securities Characteristics," as well as general regulations for securities trading, including the "Securities Transaction Act," "Standards for Internal Control Systems of Securities Firms," and "Standards for the Premises and Equipment of Securities Firms and Securities Trading Assistants," in order to operate STO businesses.

According to the Ministry of Finance's directive No. 10900005070 issued in 2020: "For amounts raised below 30 million New Taiwan Dollars, virtual currencies with securities characteristics that comply with the regulations of the OTC market are considered other securities approved for public offering under Article 1, Item 2 of the Securities Transaction Tax Regulations, and their trading should be taxed at 1‰ according to Article 2, Item 2 of the same regulations," clarifying the securities nature and tax regulations of STO businesses. Additionally, since STO businesses fall under the category of securities regulated by the Securities Transaction Tax Regulations, their trading profits should be subject to the income tax suspension provisions of Article 4, Item 1 of the Income Tax Act.

3.3 Taiwan's Cryptocurrency Regulatory Framework

Taiwan does not yet have a complete legal regulatory system for cryptocurrencies, but it is actively drafting relevant regulations. From the perspective of combating money laundering crimes, Taiwan's current cryptocurrency regulatory framework mainly revolves around the "Anti-Money Laundering and Counter-Terrorism Financing Regulations for Virtual Currency Platforms and Trading Businesses" (hereinafter referred to as the "Anti-Money Laundering Regulations"). In these regulations, Taiwan's "Executive Yuan" designates the "Financial Supervisory Commission" (FSC) as the supervisory authority for this business's anti-money laundering efforts. The Anti-Money Laundering Regulations incorporate the international standards of the Financial Action Task Force (FATF), focusing on preventing money laundering and combating terrorist financing. Regulatory requirements include strict customer identity verification (KYC), ongoing reviews, reporting of large transactions, reporting of suspicious money laundering transactions, internal controls, and audits. Cryptocurrency platforms and trading businesses must comply with these regulations to provide legal cryptocurrency services in Taiwan. Individuals and entities that fail to complete anti-money laundering registration with the FSC to provide cryptocurrency services will face severe penalties.

In terms of maintaining the security of cryptocurrency assets (such as preventing theft or loss), Taiwan is gradually shifting from industry self-regulation to public authority regulation. Before 2023, the management of fund security was to be implemented by practitioners, adhering to self-regulatory norms, which specifically included: following the "Virtual Currency Industry Cybersecurity Standards" established by the private organization "Bitcoin and Virtual Currency Development Association"; and implementing fund security management measures in accordance with ISO/IEC 27001 international cybersecurity management system requirements; obtaining certification for this international standard or other international standards. Subsequently, based on the directive from Taiwan's "Executive Yuan" in March 2023, the FSC has taken on the role of the supervisory authority for "virtual asset platforms with financial investment or payment characteristics" and plans to gradually strengthen regulation of cryptocurrency platforms. In September 2023, the FSC announced the "Guidelines for the Management of Virtual Asset Platforms and Trading Businesses (VASP)" (hereinafter referred to as the "Guidelines") as a reference for operators to comply with business operations. The Guidelines regulate the business conduct of VASP operators based on the Anti-Money Laundering Regulations: on one hand, the Guidelines restrict VASP operators from conducting certain business activities, such as issuing stablecoins, engaging in derivative financial product trading based on cryptocurrency assets, and operating securities-related cryptocurrency businesses without permission; on the other hand, the Guidelines implement public authority regulation from the perspective of fund security through mechanisms for the issuance and delisting review of cryptocurrency assets, asset segregation mechanisms for VASP operators and customer assets, internal rules of VASP operators, and advocacy mechanisms for systems and mechanisms (such as consumer complaint channels).

4. Summary and Outlook

Taiwan's taxation and regulatory policies in the field of cryptocurrency assets are gradually moving towards standardization and transparency. Currently, Taiwan views cryptocurrency assets as virtual goods and securities with economic value and has established a flexible tax framework. At the same time, the FSC has strengthened its regulation of cryptocurrency platforms in areas such as anti-money laundering, fund security, and investor protection through the Anti-Money Laundering Regulations and the Guidelines for the Management of Virtual Asset Platforms and Trading Businesses.

Looking ahead, Taiwan's cryptocurrency regulation will further move towards the rule of law. It has been confirmed that the FSC will include "drafting a special law for VASP to effectively regulate VASP market behavior and improve investor protection mechanisms" as a key focus for 2025, with plans to complete the draft of the special law and submit it to Taiwan's "Executive Yuan" in the first half of 2025; at the same time, the FSC is also working to expand cryptocurrency custody services and will begin accepting applications from operators for trial operations starting January 1, 2025, with a list of approved practitioners to be published after review by the FSC. With the improvement of regulation, Taiwan may introduce more detailed tax policies to address current disputes over the calculation of cryptocurrency trading costs, thereby influencing trading behavior and investment models in the cryptocurrency market.

Overall, Taiwan's policies in the field of cryptocurrency assets are moving towards a more systematic and international direction, providing investors with a safer trading environment and laying a solid foundation for innovation and sustainable development in the industry. In the future, with the implementation of the VASP special law and the optimization of tax policies, Taiwan is expected to occupy a more important position in the Asian cryptocurrency market.

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