Starting in 2025, cryptocurrency profits will be classified as taxable income. Whether you're trading Bitcoin, Ethereum, or other digital assets, understanding tax obligations is crucial. This guide covers everything from taxable events to legal deductions and smart strategies to minimize your crypto tax burden.
Cryptocurrency Taxation Methods
In Taiwan, the Financial Supervisory Commission and Central Bank classify crypto as "virtual commodities"—highly speculative digital assets, not legal tender. Profits from trading are treated as capital gains under Income Tax Act Article 14-1-7. Tax applies only when converting crypto to fiat (e.g., withdrawing to a Taiwanese bank account).
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Domestic vs. Foreign Income
- Domestic Income: Withdrawals to Taiwanese banks via local exchanges (e.g., MAX Exchange). Taxed as part of your annual consolidated income.
- Foreign Income: Withdrawals via overseas platforms (e.g., Kraken, Bitfinex) or外币电汇. Governed by offshore income rules.
Domestic Income Tax Calculation
Formula: Taxable Income = Withdrawal Amount - Purchase Cost + Other Income (Salary, Dividends)
Rates follow progressive tax brackets (5%–40%).
Key Threshold: Transactions > NT$500K trigger AML reporting, but smaller amounts may still be audited.
Offshore Income Tax Rules
Reportable only if:
- Annual foreign income ≥ NT$1M
- Total basic income (including foreign earnings) > NT$7.5M
- Alternative Minimum Tax (20% of (Basic Income - NT$7.5M)) exceeds regular income tax.
6 Proven Tax-Saving Strategies
1. Leverage Offshore Exchanges for Withdrawals
Convert crypto to USD via platforms like Kraken or Bitfinex, then wire to a Taiwanese外幣帳戶. This classifies gains as foreign income, benefiting from the NT$7.5M exemption.
Recommended Exchanges:
- Kraken: Zero-fee USD withdrawals, compliant since 2011.
- Bitfinex: Supports TWD withdrawals; ideal for mid-large traders.
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2. MAX Exchange Domestic Withdrawals
For small sums (<NT$670K/year), MAX withdrawals incur no tax. Larger amounts are taxed progressively (5%–40%).
Note: Professional traders with monthly sales >NT$40K must register for business tax.
3. Advanced Tactics
- Invest Overseas: Hold stocks/ETFs in foreign accounts (e.g., HSBC US → HSBC TW) to defer capital gains tax.
- LineBank Backpack Method: Withdraw USDC→USD via Backpack Exchange to LineBank (NT$50 fee).
4. Deduct Trading Losses
- Domestic: Offset losses against capital gains (carry forward unused losses for 3 years).
- Foreign: Requires platform-verified records; harder to claim.
5. Document Purchase Costs
Retain all buy orders, fees, and transaction logs. These reduce taxable profits.
6. Spend Crypto Directly
Use crypto debit cards (e.g., Crypto.com Visa) or pay merchants in crypto to avoid fiat conversions and taxes.
Binance Tax Calculator Tutorial
Binance’s Tax Tool auto-generates reports:
- Log in → Select "Other Countries" + USD.
- Import transactions (takes 1–4 hours).
- Download tax reports (desktop required).
FAQ
Q: Do I pay tax if I hold crypto without selling?
A: No. Tax applies only upon selling/withdrawing to fiat.
Q: How are NFT sales taxed?
A: Treated as property transactions. Profits are taxable; losses may be deductible.
Q: Can mining rewards reduce taxes?
A: Yes—mining costs (hardware, electricity) offset taxable income.
Q: What if I forgot to report crypto taxes?
A: File an amended return proactively to avoid penalties.
Q: Are stablecoin trades taxable?
A: Yes. Each trade (e.g., USDT→USDC) is a taxable event in many jurisdictions.
Q: Best way to track crypto taxes?
A: Use tools like Binance Tax, Koinly, or CoinTracker for automated calculations.
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