• China’s local tax authorities have begun to impose a 20% personal income tax on the investment profits of individual crypto investors and Bitcoin miners. 
  • Within the current legal framework, China does not prohibit individuals from holding Bitcoin and cryptocurrencies under the invalid civil act. 
  • Experts argue that the need to tax cryptocurrencies may have the potential to force the legalization of the crypto industry in China.

Chinese journalist Colin Wu reported Chinese authorities’ efforts to tax cryptocurrency firms and individuals. Experts believe that in an attempt to control the collection of crypto taxes, China could legalize crypto. 

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China’s tax authorities impose 20% personal income tax on cryptocurrency profits

Colin Wu reported that local tax authorities in China have begun imposing a 20% personal income tax on the investment profits of individual crypto investors and Bitcoin miners. China currently has strict regulations on illegal financial activities in the form of virtual currencies. However, based on the current situation, holding Bitcoin and cryptocurrencies in the portfolio is not explicitly prohibited by the law. 

Cryptocurrency-related activities are not legal in China. This poses a challenge for taxation. As of early 2008, there were a lot of discussions around virtual tokens on online forums and games. Wu reported that experts are of the opinion that the need to tax cryptocurrencies may have the potential to force the legalization of the crypto industry in China.

While the Chinese government has been cracking down on cryptocurrency trading and mining, there are indications that they consider legalization and regulation of crypto to gain more control and collect taxes. Cryptocurrency-related activities are not legal, however this poses a problem for taxation and similar discussions have taken place as early as 2008. 

In October 2021, China Tax News, a subsidiary of the State Administration of Taxation, published an article “Preventing Tax Risks from Virtual Currencies.” This represents the stance of tax authorities on digital assets and their taxation. 

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