Taiwan Crypto: FSC Regulation & Tax #42

Country facts

Taiwan crypto score

Trade and store crypto

FSC regulation, VASP licensing, and Taiwan’s blockchain startup ecosystem

A modest rise of two places for Taiwan put it within touching distance of a top twenty place in the Coincub Crypto rankings for Q3 2022. The country’s government and financial institutions have long held a positive crypto outlook to fuel Taiwan’s ambition to become a world-ranking financial hub. Figures for the blockchain business community are very high but low to average figures for crypto transactions; ownership and ICOs hinder the country’s ranking ascent.

Bitcoin and cryptocurrency trading in Taiwan

Taiwan has a buzzing crypto economy with plenty of outlets ready to accept bitcoin through a myriad of channels such as bitcoin coupons.

Bitcoin tax in Taiwan

Cryptocurrencies are not accepted as currencies in Taiwan, but more as a speculative digital commodity. The issuing of security tokens is regulated and applicable to professional investors only. For the most part, there are no specific laws and regulations created to address cryptocurrency trading and there are currently no licensing requirements for crypto platforms or crypto exchanges.

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Paying taxes on Bitcoin trading in Taiwan

Whilst there are no specific laws relating to cryptocurrency, trading the country’s standard income tax laws apply to any income earned from trading from a Taiwan-based exchange. Rates of income tax applicable depend on whether you are a business entity or an individual. As an individual, any trading income is assessed with any other income gained for which the highest progressive rate is 40% of the net taxable income.

In addition to standard income tax that may be applicable to your crypto income, there is also the possibility of Value Added Tax, as trading may be deemed as a performance and sale of services. In this case, your liability could be 5% VAT on the revenue unless the monthly sales amount is within $1,300.

Taiwan crypto mining regulations

Mining is legal in Taiwan but as we all know, requires vast amounts of energy and huge computing power. In many countries the cost is prohibitive but when Bitcoin prices rise, so too does mining activity generally. In Taiwan, there is no specific law that addresses cryptocurrency trading or mining. It’s likely that tax on gains for exchanging any mined currency would fall under standard income tax laws.

Taiwan’s Financial Supervisory Commission set out a new framework for deregulating Security Token Offerings (STO). Such a freeing up of STOs, however, comes within a tight and controversial set of restrictions as well as strict anti-money laundering requirements meaning that Taiwanese STOs are mostly the province of professional investors only.

Taiwan’s financial outlook on Bitcoin and the crypto economy

Unlike every country on the planet, Taiwan appears to be in no great hurry to experiment with a rollout of a central bank digital currency (CBDC). The country is not against it but has not set a timetable because, again unlike many other countries, there is no particular hurry to move away from the use of cash in the financial system at present. This sanguine approach is in direct contrast to China which is actively pursuing its own CBDC. The Taiwan ‘govcoin’ would only be an option if it were found to be safer and easier to use than current mobile payments, and addressed the consumers’ needs more adequately. As regards mainstream bank involvement in crypto, the Financial Supervisory Commission (FSC) has ordered local banks not to accept bitcoins or provide any services related to bitcoins, such as the exchange of bitcoins for fiat currency. At present no banks or financial institutions may allow cryptocurrency accounts.

Taiwan and Defi: the latest developments

As with all the countries dealing with cryptocurrency – even those that have banned it – Taiwan is highly interested in the potential of blockchain technology. Ongoing discussion and assessment of new applications of cryptocurrency and blockchain technology such as Defi (decentralized finance) and NFT (non-fungible tokens) are keeping the country from applying any firm decisions. The classification of Defi activities and how it is to impact banking and investment services from a legal point of view is constantly under review. Decentralized finance (Defi) as an alternative to the present financial monetary system may remain a topic for debate for some time.

Crypto regulation in Taiwan

Taiwan’s Executive Yuan implemented an Anti Money Laundering ruling to cover the activities of currency platforms and trading services exchanging between virtual currency and New Taiwan dollars, foreign currencies, or currencies issued by mainland China, Hong Kong or Macau.

The ruling takes in custodial services and administration over cryptocurrency generally, and any sales of cryptocurrency. On a personal level, checking the track record of any exchanges and wallets you deal with is always recommended. Some have superior records of security against hacking. Levels of insurance, fees and customer service are also variable between crypto services providers that you might like to check.