China To Begin Taxing Profits From Virtual Currencies

The Wall Street Journal reports that the Chinese government will collect a 20% personal income tax on any profits obtained through the redistribution of virtual currency. The legislation is intended to curtail speculation in virtual markets, which can be quite profitable. Quoting: "The announcement, which was distributed to local tax bureaus, specifically takes aim at those who buy virtual currency from gamers and surfers and sell it to others at a mark-up. Taxation officials are granted the right to determine the original price of online virtual currency if the individual fails to provide proof of an original price, it says. The policy would cover China's legions of online gamers, who can use online virtual currency to buy better equipment and new powers for their online warriors. But it also affects millions of others who use virtual currencies on instant-messaging services and Web portals."

Comments

Re:Q-coins

[gzipped_tar]

I think you (or the WSJ journalist) are reading it wrong. The Gov. doesn't collect "virtual tax" of any kind. That simply doesn't make sense.

The announcement made by the Chinese State Administration of Tax basically said this:

1. If you buy virtual stuff in real money and resell the virtual goods at a higher price, then the price difference you collected shall be taxed.

2. The tax law already has a section covering this kind of activities. According to the law, the tax rate should be 20%.

3. If the reseller can't provide valid proof of the price at which he/she bought the virtual goods, they shall be evaluated by the local taxation office.

They made this announcement because the local taxation bureau of Beijing asked them about the taxation rate of reselling virtual goods (incl. virtual money, gaming items, etc). The announcement is the official reply.