China Taxation News: Guarding against tax risks brought by virtual currency

On October 19, China Taxation News published an article titled "Preventing Tax Risks Brought by Virtual Currency". Judging from the current situation, it is difficult for global transactions of virtual currencies such as Bitcoin to disappear in a short period of time, and the future development direction is also uncertain.

At the same time, within the current legal framework, my country does not prohibit individuals from holding virtual currencies such as Bitcoin, and the transaction of virtual currencies is defined as an "invalid civil act", but it is not explicitly prohibited by law.

From a taxation perspective, my country should strengthen inter-departmental collaboration and international multilateral regulatory cooperation for domestic enterprises and residents participating in domestic and overseas transactions of virtual currencies, focus on preventing illegal cross-border outflows of funds and the use of virtual currencies to evade taxes at home and abroad, and include virtual currency accounts in the exchange of tax-related information on financial accounts. At the same time, my country should improve the relevant property declaration and registration mechanism, and conduct real-name registration and dynamic tracking of users holding large amounts of virtual currencies.

In the judicial fields of fines and confiscation, reorganization and merger, bankruptcy and liquidation, etc., the disposal methods of virtual currency should be clarified to avoid the loss of state tax revenue. In addition, the tax department should take the initiative to cooperate with the central bank, financial supervision, market supervision, public security and judicial departments to crack down on the use of virtual currency for underground economy, smuggling, money laundering, tax evasion and other illegal activities.