Author: FinTax

During this discussion, the global regulatory compliance heat for crypto assets continues to rise, with countries strengthening tax information exchange and tracking for on-chain assets, overseas accounts, and cross-border transactions. In this session, Calix and William combined their cross-border tax practical experience and on-chain business backgrounds to discuss hot topics such as global tax compliance for crypto assets, tax arrangements, and regulatory games. The two discussants also shared their visions for an ideal Web3 tax system in the future and discussed the tax logic in various scenarios such as exchange compliance, DeFi, mining, and airdrops, using real cases.

Who Should Cross-Border Income Be Taxed By?

Calix: William, I want to start with a "soul question." You are also involved in mining, and your company sometimes pays bonuses in cryptocurrency. How do you usually fulfill your tax obligations for this type of income?

William: This is a very practical question. I strongly agree with a point you mentioned earlier: since we are enjoying the infrastructure and business environment provided by a certain country or region, fulfilling tax obligations is reasonable. But the reality is not that simple. Our company's clients are distributed across multiple markets, including North America, Europe, and the Middle East, and this income relies on conditions provided by multiple locations, making it difficult to attribute it entirely to one place.

Although I mainly deal with U.S. clients, and most of the income comes from the U.S. market, it is actually hard to determine who this tax should be paid to.

Overall, I am willing to pay taxes, but for this type of income, it is indeed not easy to clarify who the money should go to. After all, the formation of this income does not solely depend on where I am located.

Calix: Yes, I think your answer really hits the key point. Web3 projects are inherently cross-national and cross-regional, making it difficult to accurately attribute income to a specific location. Economic activities are related to both the source of clients and the platforms, networks, and infrastructure used. Therefore, the question of who should ultimately pay this tax is indeed worth exploring in depth.

To be honest, although I have been working in tax-related fields for many years, I have also been confused by this issue. According to current tax laws, I might be a tax resident of the mainland, and I might also have tax obligations in Singapore, but my business mainly targets North America, and sometimes I receive compensation through a Hong Kong company. If I were to follow tax laws strictly, the answer might seem clear on the surface, but determining what is more reasonable is indeed worth pondering. For Web3 practitioners, these discussions often exceed the traditional tax framework's ability to fully cover.

William: Exactly, I think the core issue is that the evolution of the global tax regulatory system is indeed struggling to keep pace with the development of technology and the industry. Regulation has been trying to catch up, but industry changes and technological innovations are always ahead. This state of being "chased" may persist for a long time, and there will always be a dynamic balance between regulation and the industry.

Case Discussion: Tax Supplement for Individual Crypto Trading in Mainland China

Calix: Recently, there have been two hot topics in the Chinese Twitter community, one of which is an announcement from the Zhejiang tax bureau stating that an individual was required to pay back taxes due to crypto trading. Later, we learned through some channels that this was actually after CRS information exchange, where the tax bureau discovered an unusual balance in his overseas bank account and asked him to explain the source of the funds. He explained that this part was investment income, thus requiring him to pay taxes, and this investment happened to involve cryptocurrency.

For me, this kind of case is not surprising, as it is within my area of expertise, so I find it quite normal and representative. William, you have been working on on-chain projects like DeFi and mining; what do you think about this case?

William: It is indeed very representative. We had actually judged early on that crypto trading would eventually fall under the tax scope. But when this happens to people around us, especially for many Chinese, the impact is still quite significant. Traditional DeFi or some purely on-chain activities have always been difficult to regulate, often relying on user compliance. In the past, there were indeed some regulatory barriers that led tax authorities to lack strong enforcement for these relatively niche, decentralized, and hard-to-trace on-chain activities.

I think the reason this is happening so "timely" now is also related to other trends in the industry. Recently, there have been many reports indicating that some U.S. stock investors have received notifications via text or phone calls asking them to pay back taxes, indicating that regulation is beginning to closely track individuals' overseas income, with the first focus being overseas securities investments.

The logic behind this is also clear: the intersection between U.S. stocks and the crypto space is growing. From Robinhood to Asian brokers like Tiger Brokers and Futu, even Guotai Junan International, many brokerages are dealing with crypto assets, making it increasingly difficult to separate U.S. stocks from crypto assets. Once we look at overseas income comprehensively, checking U.S. stocks can easily bring the crypto space into view, especially since the scale of crypto assets is no longer small.

Moreover, this "stock-crypto combination" is not a short-term phenomenon. For example, in the U.S., some companies are trying to tokenize U.S. stocks; in Asia, conversely, they are putting crypto assets into listed companies to drive stock prices and obtain premiums, boosting secondary market performance. This combination is driven by interests, whether it is "stocks becoming crypto" or "crypto being packaged as stocks," which will further strengthen the connection between the two, making it inevitable that "crypto trading will incur taxes."

Overall, the crypto asset and stock market are highly intertwined, and as this trend continues to develop, the tax issues surrounding crypto trading will become increasingly rigid, with less room for avoidance.

Calix: This perspective is indeed quite novel; I hadn't thought deeply from the "stock-crypto linkage" angle before. After all, for stock investments, people are already accustomed to where the money is earned and where taxes are paid, whether it is capital gains tax or business income from quantitative investments, the framework is relatively clear.

But when it comes to cryptocurrency, some regions, especially the mainland, still have gray areas regarding "whether to pay taxes and what taxes to pay." However, looking at the evolution of stocks and tokens, this line of reasoning is indeed enlightening and reminds everyone that this is a new issue that requires long-term attention.

The Long-Term Game Between Regulation and Tax Avoidance

William: Calix, based on your years of frontline tax practical experience, now that this has been initiated, do you think some people will start to avoid cryptocurrency out of fear of tax risks? Or will there still be people willing to take risks to find ways to evade taxes, or even simply not report taxes and continue to operate heavily in the crypto space? What impact will this have on the overall industry direction?

Calix: This is a very typical real-world issue. I have always believed that regulation and "anti-regulation" coexist; this is not only a characteristic of the crypto space but also applies to traditional industries. For tax authorities or any regulatory body, they certainly hope to collect the taxes owed as completely as possible; from the taxpayer's perspective, regardless of the region, everyone hopes to legally minimize taxes or reduce tax burdens, and these two demands are inherently contradictory.

From my experience, this dynamic resembles a contradiction ingrained in human nature, always moving forward in a cycle of conflict, balance, conflict, and re-balance. Especially in recent years, regulatory measures have become increasingly diverse, and technological means have become more digital. For instance, in the mainland, tax regulatory capabilities have indeed improved rapidly in recent years, and the level of information technology has also been enhanced. However, at the same time, tax avoidance methods are also evolving. Early on, it might have been just cash transactions, hiding income, and money laundering; what I mean by "tax avoidance" here refers to non-compliant tax evasion.

Later, with the advent of cryptocurrency, for some taxpayers, it provided a new operational space. For a considerable period, cryptocurrencies were indeed difficult for tax authorities to track. Even if some regulatory bodies had on-chain tracking capabilities, the enforcement often lacked sufficient strength, so some people indeed enjoyed the "sweetness" during this time.

But the core of the future still depends on scale. For example, in the early days of the crypto space (2013 to 2017), many large mining farms and miners actually paid great attention to financial and tax compliance; compliance was the bottom line of operations. However, there were also large-scale players willing to take risks to evade taxes, and these two situations have always coexisted.

From a trend perspective, the early "wild" phase had a low emphasis on compliance, but as we move to today, more large institutions will prioritize compliance. After all, in mainstream markets like Hong Kong, Singapore, and Europe and the U.S., regulatory bodies, especially tax authorities, are gaining a deeper understanding of crypto assets, which is an irreversible trend.

As for individual investors, such as retail investors or Web3 project employees, whether they can comply depends more on the actual amount. If the scale is too small, completing some necessary reporting actions is usually sufficient. Law enforcement also needs to consider the cost-benefit ratio; unless there are some "demonstrative" typical cases, like the recent discussion on Twitter about "paying back over a hundred thousand in taxes," the amount is not large, but it has a certain warning effect.

So overall, large institutions will only place greater emphasis on compliance because it is a prerequisite for sustainable operation; while individual C-end participants, like in the real world, are fundamentally still directly related to the amount involved.

The Boundary Between Improper Income and Asset Compliance

William: I think there is also a very interesting point here. Many people feel that paying taxes is, to some extent, a way to prove the legitimacy of assets or income. But in the crypto space, to put it bluntly, there are quite a few "scams," which, in legal terms, are some improper financial operations. These actions can also yield high returns. So if these individuals pay taxes as required, does that mean they are, in a sense, "laundering" essentially improper money through taxation? This question might be a bit sensitive; what do you think?

Calix: This is a great question, and I often think about this boundary myself. I believe that whether or not to pay taxes can at most prove that tax obligations have been fulfilled, but it cannot fundamentally prove that the funds are legitimate in a broader sense. If a sum of money simultaneously violates other financial regulatory laws, such as SEC regulations, or involves fraud or other financial illegal activities, even if taxes are paid, it does not affect other regulatory agencies' penalties and tracing of the source of these funds.

For example, if the funds are involved in money laundering, organized crime, or gray areas, touching upon international anti-money laundering regulations, or if someone in Hong Kong violates local customs or financial regulations, then paying taxes in Hong Kong cannot simply be understood as that money is no longer "dirty money." Tax compliance and the legality of funds are two separate legal dimensions and cannot be equated simply.

William: I agree. I would like to add that I have always felt that the issue of "tax" should have been discussed earlier because one must first acknowledge that an asset is legitimate before discussing taxation. If the nature of this money cannot be effectively confirmed, it cannot even be considered a quantifiable asset, and naturally, there is no talk of reporting and paying taxes.

In the overall environment in China, this area has always been quite vague, mainly because many times the legality of assets has not been fully confirmed, making it difficult for people to establish tax habits, and regulation cannot truly advance. However, looking at a global scale, especially in most developed countries and regions, the legality of crypto assets has become relatively clear. As long as the legal status is determined, local tax authorities will require this income to fulfill tax obligations.

For many Chinese, if this money is confirmed as taxable overseas income, it is theoretically quite difficult to completely bypass it. The timing of this occurrence is also related to the gap in international systems. In the past, people thought that the on-chain aspect had technical barriers and strong concealment, making regulation difficult to track, so they held onto "fantasies." But now, a very obvious trend is the development of RegTech (regulatory technology). It is continuously enhancing regulatory agencies' information mastery and data analysis capabilities, and many service companies are also providing support, which will largely bridge the information gap between regulation and the industry.

Tax Planning Space for Enterprises and Individuals in the Crypto Space

William: I want to ask you a practical question. Since it is actually very difficult for ordinary users to completely "avoid" this tax, is there still a possibility to do some tax planning through compliant means? From your practical experience, is there a significant space for enterprises and individuals to engage in tax planning in the crypto space?

Calix: I will start this topic with a rather "heart-wrenching" conclusion: for most ordinary people, the space for tax planning is actually very limited. The main reason is that ordinary people's sources of income are relatively singular, mainly consisting of salaries, bonuses, or some small allowances, all of which are fully recorded by the company. Once the company reports truthfully, individuals find it hard to have any additional "optimization" room.

So for ordinary individuals, what they can do more is to fully utilize the preferential policies already present in the local tax laws, such as exemptions, child support, elderly support, and marriage deductions. Effectively using these basic deductions and ensuring compliance in reporting is already considered the "optimal solution."

William: Yes, it does sound like the space is limited.

Calix: However, the situation is different for high-net-worth individuals or enterprises. Their income forms and structures are usually more complex, with diverse sources and larger transaction scales, leading to more cross-border tax matters. This diversity and complexity naturally bring more operational space.

In simple terms, different types of income are subject to different tax rates and taxation methods. For example, salaries are taxed at full rates, while capital gains or dividends often have relatively more favorable tax rates or exemption conditions. Additionally, the differences in tax systems between regions, such as between the mainland, Hong Kong, Singapore, the U.S., or Canada, are quite evident, and there may be "arbitrage opportunities" in cross-border arrangements.

Moreover, let's not forget that whether in a civil law system or a common law system, tax laws are fundamentally expressed through texts, and legal provisions often leave some "gray areas." For high-net-worth individuals and large institutions, they have sufficient resources and professional advisory teams to research and utilize these spaces, maximizing tax optimization within the legal limits.

This is also why I have always felt that the middle class is one of the hardest-hit groups: their income appears to be not low, working hard in companies or large firms, earning hundreds of thousands a year and often working overtime, but their income structure is singular, with limited operational space and very little room for tax savings; in contrast, high-net-worth individuals and large institutions earn more and have more operational tools.

Therefore, regardless of the country, the middle class is usually a key focus group for tax authorities—earning just above a sensitive threshold but lacking sufficient resources to legally hedge, making them the easiest to be "precisely targeted" in enforcement.

Potential Tax Obligations and Optimization Space for Mining, Airdrops, DeFi, etc.

William: Calix, you just mentioned the issue of income structure, which I find very interesting. In the past, people's sources of income were indeed relatively singular, mainly salaries and bonuses. However, the crypto space has provided many middle-class and ordinary people with more diverse income channels, such as mining, airdrops, staking, and DeFi earnings. For instance, a mining machine might only cost $2,000, and buying a few can be affordable for the middle class, making it a small "business" activity. This new income brings added complexity; could you briefly introduce what tax obligations might be involved with different forms of income?

Calix: I think it might be more beneficial to discuss "how to pay taxes" directly, but let's also consider whether there are some legal spaces within these activities. Although this topic is indeed sensitive, I believe it can still be briefly discussed.

Many ordinary people see their income forms as diversified, but from a tax perspective, the core issue is: the income subject is generally still yourself, without the multi-layered structures of trusts, companies, or funds to disperse the tax burden. For example, mining is generally recognized as business income in most regions; airdrops, if simply received but not disposed of, typically do not trigger tax obligations until converted into fiat currency or exchanged for other currencies, resulting in actual gains that need to be reported. Staking or DeFi earnings can be classified as capital gains in some jurisdictions, and capital gains tax rates are usually lower than business income, with some regions not imposing any tax at all.

So there is indeed space for "reasonable definitions," such as whether certain high-tax business income can be reasonably interpreted under local tax laws as capital gains or other income types with preferential tax rates. However, this premise relies on tax laws leaving gray areas, and regulatory enforcement not being able to fully and accurately track on-chain activities. Otherwise, once the data becomes traceable, the space will shrink significantly.

Thus, fundamentally, it is unrealistic for ordinary people to engage in large-scale tax planning because all income is tied to the individual, making it easy to be classified as business income or high-tax categories. In contrast, activities like airdrops and forks, if local policies allow, may be treated as low-tax or deferred. Many people will explore how to reasonably convert high-tax portions into categories with lower tax rates and better treatment, which requires looking at whether local laws leave enough space and whether the operations are compliant.

Practical Considerations for Digital Nomad Identity Planning

William: I would like to follow up on one point: there are quite a few people in the crypto space who call themselves "digital nomads." Previously, I might not have paid much attention, thinking that as long as they do not engage in illegal operations, reporting taxes domestically would suffice. But do you think more people will actively change their tax residency to a certain overseas region in the future? For example, wanting to use bilateral tax agreements to say, "I paid taxes in Singapore, so I don't have to pay them again in the mainland." Will this path become a more chosen legal planning direction for many?

Calix: This is actually a relatively legitimate approach, using different tax jurisdictions to lower overall tax burdens. However, I also want to remind you that regardless of where you report taxes, it is essential to keep good records of inflows and outflows, transaction records, and other materials, which can serve as key evidence during tax inquiries to avoid unnecessary trouble. Moreover, there is currently a CRS (Common Reporting Standard) mechanism globally, making it difficult to completely "hide" information in the long term. From a broader trend perspective, cross-border identity planning is worth considering, but in any case, documentation and records must be complete, and what needs to be reported must be reported truthfully.

I would like to add one more point. Taking Singapore as an example, I recently had a friend who asked a similar question. He works in Singapore, and his income is settled in USDT or fiat currency, and he pays taxes normally there. He asked whether he still needs to report back in the mainland. His situation is that he spends less than 183 days a year in the mainland.

From the perspective of mainland tax law, whether an individual constitutes a tax resident is primarily determined by the "183-day" rule, but in more detailed regulations and practical operations, factors such as nationality, household registration, and primary social relationships are also considered. If these connections are all in the mainland, even if the person is overseas, they may still be regarded as a Chinese tax resident and need to complete a full tax reconciliation to offset already paid taxes. Moreover, whether you hold a Singapore EP (Employment Pass), PR (Permanent Resident), or another type may also affect the outcome. There is no fixed template for these situations; it must be analyzed on a case-by-case basis.

William: So even if you don't stay in the mainland for a full 183 days in a year, you can't simply assume that you are completely "safe."

Calix: Right, things are not that absolute. In international tax, there is a "tie-breaker rule" that considers your family relationships, economic interests, daily life trajectory, and other factors to determine the primary tax residence layer by layer.

William: Yes, many people tend to overlook this point. Even if they are overseas, with visas or identities also overseas, if their main family and social connections are still in the mainland, according to the "tie-breaker rule," they will often still be recognized as Chinese tax residents, so this part must be particularly noted.

Visions for the Future of Crypto Taxation

Calix: Alright, William, finally, I want to ask a more open question, which can also serve as a conclusion to this discussion.

From your personal perspective, as someone who has been deeply involved in the crypto space for many years, what kind of tax system do you think would be more friendly to Web3 users? Or, what is your ideal and most anticipated tax model?

William: This question carries some of my personal views and does not represent any company's position.

I have always resonated with the concept of "sovereign individuals," which is native to crypto, and I am somewhat idealistic, agreeing with the possibility of "Network States" mentioned by Vitalik and others. I believe that at some point in the future, this form will slowly take root in some corner of the world, and it may even become an irreversible trend.

As time goes on, the infrastructure that humanity relies on may increasingly shift from the physical world to the digital world. For me, currently, about 80% is still at the physical level, and 20% is digitalized, but in the future, the impact of digital infrastructure on everyone will certainly surpass that of the traditional physical environment.

Just like how it was often said in the internet space that "hardware is free, software is charged," there were once manufacturers that gave away phones for free, but content and services were charged over the long term. I think the future may be similar: the "hardware" part of the physical world may bear a lighter burden, while what truly requires continuous payment will be the "services" in the digital world.

From this perspective, I resonate with a point you mentioned earlier: the blockchain infrastructure relies on physical resources such as electricity, networks, and chips. Miners and nodes consume these resources to provide network services, and the money they earn should bear most of the tax responsibilities to the physical world. For C-end individuals, they enjoy the digital services provided by these nodes and miners, so they pay "service fees" to the network through Gas fees, which are then used by miners and nodes to fulfill tax obligations to the real world.

So in my ideal model, it would likely be a two-layer structure:

First layer: Infrastructure providers (miners, nodes) pay taxes to the physical world;

Second layer: Individual users indirectly pay fees to the network through Gas fees, which the network then channels back into the real-world tax system.

As humanity's digital spending increases, the direct tax burden on the physical world will gradually decrease, while the blockchain network will resemble a self-governing micro-tax system, fulfilling corresponding real-world obligations through Gas mechanisms and distribution structures.

Calix: I think this is a very imaginative and forward-looking idea. I also believe that with the development of the crypto industry, it will certainly carry an increasingly large volume of assets, and the deep integration with traditional finance will accelerate. In the future, it may replace some parts of traditional finance that are inefficient and lack transparency, and it will inevitably require matching new legal systems and regulatory frameworks.

Many of the viewpoints you shared today are very enlightening. As we conduct our current business, we also need to think more about what might happen in the future and even strive to promote some changes. I would like to add a point regarding RWA (Real World Assets); currently, many assets on-chain are essentially achieved through layers of packaging, nesting, and contractual mapping, and the on-chain and off-chain aspects remain quite separate. However, this may just be a transitional phase. In the future, if the legal system is more complete, asset information will be more directly and transparently on-chain, and those complex nests may gradually disappear.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。