2026 Cryptocurrency Tax Guide: Do you need to pay taxes on withdrawals? How to save on taxes? Includes insights from lawyers

Author: Crypto City Crypto City has collaborated with Attorney Cheng Hsueh-Feng, founder of Muzhang Law Firm, to provide a detailed explanation and answers regarding the basic concepts and common questions about tax filing for virtual currencies/cryptocurrencies. This article has been updated based on articles from KPMG and Yuan-Fang Joint Accounting Firm to serve as a reference for those currently filing their taxes! Note before reading: This article is for general information only and does not constitute any tax advice. Please consult a professional tax advisor for details. 2026 Virtual Currency Tax Filing FAQ The May 2026 tax filing season is approaching! For those in the crypto space, the most pressing questions are: Do virtual currencies (cryptocurrencies) need to be reported for taxes? Are virtual currencies taxable? How do I report income from virtual currency trading? How can I save on taxes when withdrawing funds from an exchange? Crypto City helps you understand virtual currency tax filing in one go! 🚨 2026 Latest Regulations: Virtual Asset Service Provider (VASP) Act Draft The Executive Yuan passed the draft of the "Virtual Asset Service Provider (VASP) Act" in April 2026, which is currently under review by the Legislative Yuan. In the future, advanced players and businesses intending to engage in over-the-counter (OTC) trading, operate platforms, or issue stablecoins will face clearer specialized regulations. However, this law does not involve tax regulations for virtual currencies (cryptocurrencies), so the general public need not worry. 🚨 2026 Impact of the Crypto-Asset Reporting Framework (CARF) on Taiwan To prevent money laundering and tax evasion, the OECD has launched the "Crypto-Asset Reporting Framework" (CARF), which brings cryptocurrencies, stablecoins, and DeFi transactions under comprehensive regulation, requiring "transaction-by-transaction" reporting and the automatic exchange of cross-border information. Major markets such as the EU, the UK, and Singapore are expected to start implementation as early as 2026. As for whether Taiwan will be affected, EY (Ernst & Young) points out that Taiwan is currently adopting a strategy of "establishing the legal framework first, then promoting CARF." Although a specific timeline for CARF implementation has not yet been announced, it is expected that the Ministry of Finance will further study its implementation after the VASP Act is enacted. Crypto City will continue to track tax changes following the specialized law. 🚨 VASP Operators: Please Note Business Tax Levies KPMG accountant Chen Chih-Kai points out that the business tax calculation methods for VASP operators and stablecoin issuers will vary depending on whether they constitute a dedicated financial business (applying 2% or 5%). It is recommended that relevant operators seek professional accounting advice early. Note: Virtual currency is a common term used by general media in Taiwan to refer to currencies issued using blockchain technology, such as Bitcoin and ETH. The more accurate term is "Cryptocurrency." Do virtual currencies/cryptocurrencies need to be reported for taxes? Do virtual currency transactions need to be reported? The answer is basically yes! You might think that the National Taxation Bureau has not explicitly included virtual currencies as a tax filing item, but in fact, the Ministry of Finance officially revealed in early 114 (2025) via "Tai-Cai-Shui-Zi No. 11304672340" that the National Taxation Bureau has included cryptocurrency transactions in its audits. In other words, according to the "Income Tax Act," when cryptocurrency transactions generate profits, they are essentially within the scope of taxation and must be included as "property transaction income." During the FTX bankruptcy, then-Minister of Finance Su Jain-Rong also confirmed that virtual currencies need to be reported for taxes, stating that if losses are incurred, they can be listed as "property transaction losses." Related news: FTX Exchange Bankruptcy Update | Minister of Finance: Investors can report losses if they declare cryptocurrency assets. Virtual Currency Taxation Methods If you simply buy and sell virtual currencies (cryptocurrencies) on an exchange, under what circumstances do you need to pay taxes? According to current practice, virtual currency transactions are usually taxed only "after cashing out" (when profits are remitted to a physical bank account), and the tax situation is divided into "domestic income" and "overseas income." Domestic Income from Virtual Currency Transactions Suppose you buy 1 BTC on a Taiwan exchange at a cost of $60,000 USD, and when it rises to $70,000 USD, you sell it for TWD on the Taiwan exchange. You will gain a profit of approximately 300,000 TWD, generating "domestic" property transaction income, which is taxed according to individual comprehensive income tax regulations. Attorney Cheng Hsueh-Feng told Crypto City that it is