For Cryptocurrency Traders and Bitcoin Miners, China has Implemented a 20% Tax

China's government has been ambivalent about its relationship with the cryptocurrency sector for quite some time, with regulations ranging from a complete prohibition to an exploration of blockchain's potential applications. Several governments have recently begun to levy a heavy income tax on cryptocurrencies.

According to a report written by Colin Wu on January 25, a number of cryptocurrency whales, miners, and other investors have stated that they have been subjected to personal income tax audits by their respective local tax departments, which began in the early part of 2022 and for which they are still awaiting the results.

According to the report, this represents the implementation of a 20% personal income tax on investment profits of individual cryptocurrency investors and many Bitcoin (BTC) miners after several major domestic exchanges handed extensive information about some of the whales' transactions to the tax authorities. This was done after the exchanges handed over the information to the tax authorities after handing over the information to the tax authorities.

Even though this practice would suggest that the Chinese government may have finally acknowledged the legal status of cryptocurrencies, the reality is more complicated, with tax officials and financial institutions having various perspectives on the legality of cryptocurrency.

An article was published in October 2021 by China Tax News, a subsidiary of the State Administration of Taxation. The article stated that the services overseas exchanges had previously provided to Chinese residents were "not expressly prohibited by law" but that these exchanges were required to pay VAT, enterprise income tax, stamp duty, and other related taxes on their income obtained from China.

The trading of virtual currencies is defined as an "invalid civil act," but it is not explicitly prohibited by law. At the same time, China has stringent restrictions on illegal financial activities that take the form of digital currencies. However, its current legal framework does not prohibit individuals from holding the likes of Bitcoin.

On the other hand, an article that was published in the China Public Prosecutor's Journal in November 2022 highlighted that the government had tightened its oversight of digital assets such as Bitcoin in recent years, citing substantial financial risks associated with them. This article was published in 2022.

According to a senior tax professional, the department of taxation has its own basis for taxation. This comes at a time when tax audits on whales have become more stringent, and the tax authorities have recently begun investigating the income of high-net-worth individuals earned overseas.

More than nine years ago, China began to restrict the country's banks' use of cryptocurrencies, primarily Bitcoin. However, since then, China has unwittingly become a crypto whale, thanks to its restrictive measures, and it has ranked as one of the top ten countries in crypto adoption.

It is interesting to note that recent revelations made in the FTX bankruptcy filing have shown that mainland China accounted for the third highest share of customers of the cryptocurrency exchange. This places mainland China directly behind island tax havens such as the Caymans and the Virgin Islands.

Because China seized a significant number of Bitcoin and Ethereum (ETH) from the Plus Token program in 2019, the government now has such a vast quantity of cryptocurrencies that it could destroy the whole cryptocurrency market in a matter of seconds if it so desired.