Hong Kong Passes New Crypto Tax Regulations: Will Profits from Crypto Trading Be Taxed at 20%? On November 4th, the Hong Kong Legislative Council officially passed a bill related to cryptocurrency reporting. Starting in 2027, qualified cryptocurrency service providers will begin collecting and reporting user transaction information. The Hong Kong Inland Revenue Department plans to exchange relevant information with partner tax jurisdictions for the first time in 2028. Following this news, many cryptocurrency users are worried: Will they have to pay taxes on cryptocurrency trading in the future? Will withdrawing money from Binance to a Hong Kong bank account be taxed? This new regulation does not increase the tax on cryptocurrency transactions. However, as cryptocurrency transactions are gradually incorporated into the cross-border tax information exchange system, user transaction information from some exchanges will be subject to stricter reporting requirements. Which cryptocurrency transactions will be reported in the future? Hong Kong is introducing the Crypto Asset Reporting Framework (CARF) established by the OECD. According to the rules published by the Hong Kong Inland Revenue Department, the transactions involved fall into three categories: - Exchange of fiat currency for crypto assets, such as buying BTC with US dollars - Exchange between crypto assets, such as exchanging BTC for USDT - And certain crypto asset transfers, including transferring assets to external wallets Eligible service providers are required to collect information such as the user's name, tax residency status, tax identification number, and the cumulative transaction amount, quantity, and number of transactions for different assets. Even if the user does not withdraw funds to a bank card, but only buys and sells BTC or ETH on an exchange, or transfers assets to an external wallet, the relevant transaction records may still be reported to the tax authorities. Who needs to pay taxes on cryptocurrency trading? Hong Kong has adopted a transaction information reporting system, without introducing new taxes specifically for cryptocurrency transactions. Whether or not cryptocurrency trading profits are taxable can be divided into three categories: First, mainland tax residents. According to the mainland's Individual Income Tax Law, resident individuals are generally required to pay taxes on taxable income both domestically and abroad, with a 20% tax rate applicable to income from property transfers. However, mainland China has not yet issued unified and clear taxation rules for personal cryptocurrency trading profits, and the actual taxation method remains uncertain. It's important to note that even if you buy and sell cryptocurrencies through overseas exchanges and then transfer the funds to a Hong Kong bank account, this does not automatically exempt you from mainland tax obligations. The second category is individuals making long-term investments in Hong Kong. Hong Kong does not have a capital gains tax. If you buy assets such as BTC and ETH for long-term investment, the profits from the subsequent sale are considered capital gains and are generally not subject to Hong Kong profits tax. Even occasional trading does not necessarily mean you will have to pay tax; the key is whether the investment activity has a business nature. The third category is individuals or institutions engaged in business transactions in Hong Kong. If high-frequency trading, quantitative market making, or similar activities constitute a business operation in Hong Kong and generate profits from Hong Kong sources, profits tax may be payable. When the two-tiered system is met, the tax rate for the first HK$2 million of assessable profits for sole proprietorships or partnerships is 7.5%, and for companies it is 8.25%; the excess is taxed at 15% and 16.5% respectively. Do I need to pay taxes when withdrawing funds from Binance to my Hong Kong bank card? This is a question of great concern to ordinary users. Withdrawing funds from Binance to a Hong Kong bank card usually does not incur additional taxes simply because the funds have arrived. For example, if you sell 100,000 USDT on Binance and then transfer it to your Hong Kong bank card via fiat currency, Hong Kong will not directly tax this amount. Whether or not taxes are payable depends on the source of the funds, the transaction gains, and the individual's tax residency status. For users who reside in mainland China long-term, even if they hold a Hong Kong bank card, they may still be considered mainland tax residents and need to handle cryptocurrency gains according to relevant mainland tax regulations. The specific taxation methods are currently unknown. Furthermore, Hong Kong banks have stricter review processes for cryptocurrency-related funds. Users may need to provide transaction records, proof of the source of funds, etc., and some banks may refuse to accept such funds. This is related to anti-money laundering and bank compliance reviews, and is separate from tax collection. In Conclusion Currently, Hong Kong CARF primarily covers cryptocurrency service providers that meet Hong Kong's related-party requirements, not all global exchanges. Whether overseas platforms like Binance, OKX, and Bybit need to report depends on the actual operating entity and applicable rules. For platforms not covered by Hong Kong CARF, users' existing tax rules remain unchanged due to this Hong Kong legislation amendment. Hong Kong plans to exchange cryptocurrency transaction data with partner regions starting in 2028, but mainland China has not yet announced a specific timetable for the first automatic CARF exchange. For ordinary users, trading and withdrawal methods will not significantly change in the short term due to this Hong Kong legislation amendment.