PwC Report: Three Major New Trends in Cryptocurrency Taxation by 2024, Taiwan Lacks Cryptocurrency Tax Guidance

As the cryptocurrency industry continues to rapidly develop, tax issues are gradually becoming an international focus. The latest "2024 Global Crypto Tax Report" released by the accounting firm PwC delves into the tax treatment of crypto assets and the challenges they bring, revealing future trends in the crypto market.

PwC Explores New Trends in Cryptocurrency Taxation

Global Push for Transparent Cryptocurrency Taxation Requires Industry Cooperation

With increased global regulation of cryptocurrency assets, tax information reporting has become increasingly important.

The U.S., the EU, and other regions have introduced new tax information reporting requirements for 2023 to enhance transaction transparency. In the same year, the Organization for Economic Cooperation and Development (OECD) launched the Crypto Asset Reporting Framework (CARF) and updated the Common Reporting Standard (CRS) for financial institutions to include new financial products in their reporting scope.

These measures necessitate cryptocurrency brokers and intermediary service providers to comply with complex reporting requirements, driving them to adopt digital tools to accurately track and report transaction data.

Tokenization of Real-World Assets (RWA) and its Tax Implications

Tokenization technology transforms real-world assets such as stocks, bonds, real estate, and art into digital tokens, enhancing the liquidity of these assets and introducing new tax challenges.

With the increasing tokenization of such assets, tax principles need to adapt to this change to determine the exact nature of tokens within legal frameworks and their tax treatment. Cross-border tokenization issuance further complicates this issue, requiring clear international cooperation and standards for management.

Tax Issues with Tokenized Payment Tools

A third trend is the rise of tokenized payment tools, including Central Bank Digital Currencies (CBDCs) and stablecoins, aimed at increasing liquidity of cryptocurrency transactions and integrating with real-world economic assets.

However, the characteristics of these payment tools, such as price volatility and credit ratings, may impact their tax treatment. Issues such as tax jurisdiction in cross-border transactions, calculation of taxable bases, and determining withholding methods pose new tax challenges with tokenized payment tools.

Urgent Need for Regulatory and Tax Standards Update

The "2024 Global Cryptocurrency Tax Survey Report" reflects the latest developments in cryptocurrency tax management and outlines potential future directions and challenges. With the further development and integration of the global cryptocurrency market, relevant regulatory and tax standards urgently need updating to address these emerging issues.

This report provides valuable insights for policymakers and market participants to navigate the evolving market environment.

Comparing Regulatory Approaches Across Countries, Taiwan Lacks Cryptocurrency Tax Guidance

PwC has compiled cryptocurrency tax guidance from various countries, noting that Taiwan's guidance on cryptocurrency taxation is limited, focusing only on taxing security-type tokens.

PwC states that in Taiwan, apart from security-type tokens issued under specific rules by the Financial Supervisory Commission and the Taiwan Stock Exchange, there is no clear guidance or income tax regulations applicable to cryptocurrencies.

However, following FTX's declaration of bankruptcy in 2022, the Ministry of Finance issued a press release addressing deduction issues for investors' losses in cryptocurrency investments. The press release indicates that for corporate investors seeking profit, income/loss from exchanging cryptocurrency for fiat currency or between cryptocurrencies is considered income/loss from property transactions and should be subject to income tax under Article 24 of the Income Tax Act. For individual investors, if the trading activities are not for frequent trading purposes, they are also considered income/loss from property transactions. The press release only identifies the type of income derived from cryptocurrency exchanges and provides general rules for calculating income/loss from property transactions but does not offer further details.

In 2019, the Financial Supervisory Commission and the Taiwan Stock Exchange released regulations regarding security-type tokens, known as the "ST Rules." Tokens issued under the ST Rules in Taiwan are considered "securities." Transactions of such security-type tokens are subject to Securities Transaction Tax (STT) but capital gains are exempt from income tax.