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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."
So, will this mean fewer gold spammers? I suppose we shall see.
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I'm assuming this means that when someone sells virtual currency for real life currency, they pay 20% of the real life currency earned to the Chinese government?
If so, what will end up happening is that gold prices go up 25%, but the market essentially stays the same for the most part.
I'm curious to see how precisely they define virtual currency. If they're using something like "property which has no physical manifestation, and is not legal tender, but which may be exchanged in certain markets for legal tender", then congratulations china, you just slapped a 20% tax on a whole range of derivatives and options traded in stock markets worldwide. Mind you, not entirely sure I disagree with doing that, in principle anyways.
I wonder what unique items would drop a chinese tax collector.
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.
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True, but only if your profits are greater than $250k annually. If your profits are that high, tighten your belt and buy one less Porsche this year. I know, it'll be rough.
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Gold farmers earn 145$ a month ... you'd need a whole village of farmers in your company to go above the limit. You'd need 145 of them though you still wont earn that much ~_~
Anyways stop spreading FUD you prick.
If I buy commodity X at $1 and resell it at $1.50 (or equivalent RMB) and I do it repeatedly, I'm a dealer of X. Tax agencies throughout the world will tax me the majority of the time on this profit. X can be anything--shoes, cars, houses, e-gold.
So, Chinese government is making it clear that you have to prove a basis cost of $1, otherwise they will tax you on the full $1.50.
This is normal, expected, and even reasonable (the righteousness of the concept of taxes aside).
I think this would be fair if they took the tax revenue and plowed it back into their virtual infrastructure - paving virtual roads, building virtual bridges, paying virtual police and firefighters, and so forth.