The Shanghai tax service recently published an explainer on the taxation of personal income from business and categorized income, citing a statement from the State Taxation Administration (STA) in 2008. The explainer gained widespread attention after being shared on WeChat by the Shanghai tax service on Thursday.
However, the Shanghai tax service later deleted the explainer from its public WeChat account on Sunday, sparking speculation among Chinese crypto enthusiasts that the government may be starting to recognize the legitimacy of cryptocurrencies.
This attention towards the explainer reflects the hope within Chinese crypto circles that the country’s strict ban on cryptocurrencies may be reevaluated, especially as the government pushes for the adoption of the digital yuan.
Despite this, legal experts have pointed out that the Shanghai tax service’s explainer does not indicate any potential change in the country’s cryptocurrency policy. The article cited by the STA only pertains to virtual tokens used in video games, according to Guo Zhihao, a partner at Beijing-based Yingke Law Firm.
The explainer mentioned that individuals who make profits by selling virtual currencies obtained from other players in online transactions are subject to income tax. The Shanghai tax agency’s article provided details on taxation in four different scenarios, including loans obtained by individual investors from their investee companies and online monetary gifts.
In a separate development, Chinese economist Jin Jianzhi has called for a review of the country’s rigid ban on cryptocurrencies, especially as the adoption of the digital yuan has been slow. While China has not given cryptocurrencies legal tender status, it does not oppose their classification as property or commodity, according to Jin.
The government has the authority to impose taxes on transactions involving virtual assets, according to Jin, as stated in an article published by the Shanghai Mankun Law Firm on Friday.
Meanwhile, the global cryptocurrency market has been recovering from a prolonged slump last year. The price of Bitcoin has increased by over 150% from a year earlier, driven by expectations of the US Securities and Exchange Commission approving Bitcoin exchange-traded funds, which would make virtual assets more appealing to mainstream investors.