Current Status and Trends of Cryptocurrency Taxation and Regulation in China series ll

Enhance Risk Awareness and Eliminate Fluke Mentality

Although the tax authorities still have great uncertainty about whether and how to tax at this stage, the relevant tax regulations are still in a nascent stage. However, in the economic aspect of taxation, there are significant links in the cryptocurrency value chain that are economically taxable, especially when combined with international tax experience. Most developed economies are gradually improving their tax legislation to fill the gaps in industry taxation. In the long run, China’s legislature and tax authorities are likely to improve industry legislation and give tax authorities statutory taxation powers. The trend towards gradual taxation is inevitable. Practitioners in the cryptocurrency industry and related parties should increase their risk awareness and eliminate the existence of a fluke mentality. Under the levy regulations, tax authorities have the rights and grounds to make retrospective adjustments to taxpayers. Short-term flukes do not imply future compliance.

 

Enhance Compliance Awareness and Plan Ahead for the Layout

Those involved in the cryptocurrency industry need to enhance their awareness of compliance. Even if the current regulatory system is not yet clear, it is still necessary to enhance tax compliance as much as possible to sort out and realize tax obligations and data that may arise from each link of cryptocurrency for the future. The tax treatment results for subjective non-payment and objective non-payment will be quite different. Make data backups, grasp the data initiative when communicating with tax authorities on specific issues in the future, and further reduce tax costs on the basis of cooperating with tax authorities and their strategic objectives.

 

Enhance Legal Awareness and Safeguard Equitable Rights and Interests

Currently, there are investigation cases against cryptocurrency industry stakeholders in some regions. Although it does not represent the official position or voice, it is a warning to industry stakeholders that they should not panic when encountering similar cases, but increase legal awareness, communicate rationally with tax authorities under existing tax laws, introduce business models, cooperate with the determination of tax obligations, and also use legal tools to safeguard the legitimate rights and interests of taxpayers. Where there are significant differences with tax authorities on specific tax-related matters, make full use of administrative reconsideration and administrative litigation to seek judicial remedies, eliminate subjectivity and overreaction at the law enforcement level as far as possible. Achieve understanding based on tax laws, levy taxes according to tax laws, and effectively protect tax rights and interests.