How to manage taxes on cryptocurrencies? Legal strategies to optimize the tax burden

Tax Outlook for Cryptocurrency Operations

In the current context, where cryptocurrencies play an increasingly relevant role in global financial markets, it is essential for Taiwanese investors to understand the applicable tax framework. In Taiwan, cryptocurrencies are officially classified as "virtual currency", being considered digital products of a speculative nature and not as legal tender or payment instruments.

The fundamental tax principle establishes that profits derived from cryptocurrency transactions are considered "income from real estate transactions," and are subject to income tax as provided in Article 14, paragraph 1, category 7 of the Income Tax Law.

It is important to highlight that the tax obligation is activated during the "withdrawal" phase, at which point the cryptocurrency is converted to fiat and transferred to a bank account.

This guide provides a detailed analysis of the tax regulations applicable to cryptocurrencies in Taiwan for 2024, covering the distinction between domestic and foreign income, calculation methodologies, treatment of losses, declarative procedures, and legal strategies for tax optimization.

Taxable scenarios in cryptocurrency operations

The taxation of cryptocurrency transactions is mainly classified into two categories: domestic income and foreign income. This distinction is fundamentally based on the "source of the withdrawal and final remittance."

Key aspect: If you only hold cryptocurrencies on an exchange without making withdrawals, there is no tax obligation.

National Income:

• When the final remittance comes from a trading platform or financial institution "located in Taiwan" (regardless of whether it is traded in New Taiwan Dollars or US Dollars)
• By using C2C/P2P services charging through national accounts (banks, Line Pay, etc.)

Illustrative examples:

1. Conversion of cryptocurrencies to TWD on Taiwanese exchanges with subsequent withdrawal to local bank accounts
2. Withdrawals in USD through XREX, where the sender is a national banking entity ( considered national income )

Foreign income:

• When the final remittance comes from a trading platform or financial institution "located outside of Taiwan"

Practical examples:

1. Direct transfer in USD from a foreign exchange to a Taiwanese bank account
2. Transfer of USD from a foreign exchange to a digital account, followed by a transfer to a Taiwanese bank account.

Important consideration: Although the operation is carried out on a foreign platform ( such as major international exchanges ), if the funds are finally withdrawn through a Taiwanese exchange, they will still be considered national income. This aspect is particularly relevant for many currency investors.

Tax Calculation Methodology for Cryptocurrency Withdrawals

Calculation for national income

This category of income is included in the "total annual comprehensive income of individuals," calculated using the following formula:

(Withdrawal amount – Initial investment cost / Operating losses) + Other related national income (salaries, dividends, etc.)

The "total individual annual comprehensive income" is subject to the "personal comprehensive income tax" according to progressive rates. It is crucial to have supporting documentation for the initial investment cost.

Case study - National income:

Suppose Mr. Li reports the following income in 2024:

1. Annual salary: 1,200,000 TWD
2. Dividend income: 800,000 TWD
3. Net profit from cryptocurrencies: 500,000 TWD

Total revenue: 1,200,000 + 800,000 + 500,000 = 2,500,000 TWD

Mr. Li will calculate and settle the personal comprehensive income tax based on a total of 2,500,000 TWD.

Technical note: The net profit from cryptocurrencies requires supporting documentation for the acquisition costs.

Calculation for foreign income

This category is included in the calculation of the "basic personal income", including:

1. Total annual personal income
2. Foreign source income
3. Benefits from specific insurance
4. Income derived from non-listed stocks and investment trusts
5. Non-monetary donations

If the total exceeds 7,500,000 TWD, a "basic income tax" of 20% will be applied on the excess. Foreign income below 1,000,000 TWD is exempt from declaration.

Practical case - Foreign income:

Let's suppose that Mrs. Li reports the following income in 2024:

1. Annual salary: 1,500,000 TWD
2. Foreign income: 3,000,000 TWD

Total income: 1,500,000 + 3,000,000 = 4,500,000 TWD

Since the personal basic income of 4,500,000 TWD does not exceed the threshold of 7,500,000 TWD, there is no additional taxation for foreign income.

However, Mrs. Li must declare the 3,000,000 TWD of foreign income when submitting her tax return, as it exceeds the reporting threshold of 1,000,000 TWD.

Special scenarios in income tax declaration

Scenario 1: Basic Income Tax > Comprehensive Income Tax

In addition to taxation according to the regulations of the comprehensive income tax, there is an additional payment for the difference between the "basic income tax" and the "comprehensive income tax".

Scenario 2: Basic income tax ≤ Comprehensive income tax

Only the settlement of the comprehensive income tax proceeds.

Technical Information: When making international bank transfers, it may be declared under the code "268 Purchase (Sale) of foreign virtual assets".

Legal Strategies to Optimize Tax Burden in Cryptocurrency Transactions

Direct transfer to foreign currency accounts

For moderate volume operators (less than $50,000): They can opt for bank transfers through specialized international platforms. Fixed fees usually range around $13 some banks apply additional charges(, with a processing time of 1-2 business days.

For high volume operators )more than $50,000(: It is advisable to consider international platforms specialized in USD bank transfer services. The fees for large volumes are more competitive. Conversely, documentation justifying the source of funds and address verification is often required.

General recommendation: Keep detailed records of all transactions, deposits, and withdrawals for future declarations, justification of the source of funds, and possible tax audits.

Frequently Asked Questions about Cryptocurrency Taxation

P1: Do only national withdrawals over 500,000 TWD need to be declared?

When a user makes a single withdrawal of more than 500,000 TWD through a Taiwanese exchange, the banking entity is required to report it to the Ministry of Justice's Investigation Bureau. However, this does not imply that withdrawals below this amount are not detectable.

P2: How to properly declare income?

• Nationals: As "Income from real estate transactions" ) applicable when no proof of acquisition cost is available (
• Foreigners: Such as "Income from real estate transactions abroad"

Final considerations

As the cryptocurrency market continues to expand, the regulatory and tax environment is evolving towards greater complexity. Authorities are developing more precise standards for the definition of domestic and foreign income, as well as for the treatment of cross-border transactions.

Therefore, it is advisable to seek the assistance of specialized tax advisors when necessary, thus ensuring compliance with regulations in investment operations while maximizing profitability.

Important notice: Cryptocurrencies represent high-risk investments. The content of this guide does not constitute investment advice nor imply any liability.