Virtual Money Trading and Taxation: An Analysis of the Current State of Chinese Policy

Recently, there have been reports that a taxpayer in Zhejiang was pursued for tax payment due to unreported profits from Virtual Money trading. This incident has raised public attention towards China's tax policy on Virtual Money trading.

The official website of the Zhejiang Provincial Taxation Bureau has indeed issued a relevant announcement, mentioning that a certain taxpayer actively cooperated in explaining the situation and made tax payments after policy guidance from the tax authorities. However, the announcement did not clearly indicate whether the taxpayer was involved in Virtual Money transactions.

Currently, there is no clear implementation policy for taxing virtual money trading in China. The State Administration of Taxation issued a reply in 2008 regarding the taxation of virtual money trading, but at that time mainstream cryptocurrencies like Bitcoin had not yet emerged, and the reply mainly targeted centralized virtual coins like QQ coins.

China's current policy holds a strong regulatory attitude towards Virtual Money. According to relevant regulations, speculation on Virtual Money, exchanges of Virtual Money for fiat currency, coin-to-coin exchanges, and other related businesses are prohibited, and Virtual Money exchanges are banned from operating within China. These activities are classified as illegal financial activities.

It is worth noting that China has not denied the legitimacy of virtual money, but does not recognize its fiat currency attributes. In judicial practice, especially in criminal cases, virtual money is recognized as having property attributes and is protected by law.

In terms of taxation, there is a logical and legal contradiction in the taxation of virtual money transactions, as investments in virtual money are considered a high-risk area where the law does not provide protection. However, in practice, it is not excluded that some tax authorities may tax the realized gains from virtual money investments due to a lack of understanding of relevant policies.

For investors, in the face of potential tax issues, it is advisable to consult a professional lawyer to obtain targeted legal advice. At the same time, investors should fully recognize the risks of virtual money investment, including possible account freezes, asset losses, and other issues.

Overall, China's tax policy on virtual money trading remains in a gray area. Before the policy is clarified, investors should act cautiously and closely monitor changes in relevant regulations.