Do Individuals in Mainland China Need to Pay Taxes on Crypto? An Interpretation of Current Rules

Published 2026-04-15 18 min read Cross-Border Compliance

Many people's first reaction when buying USDT is, "Since trading isn't allowed domestically anyway, no one will care even if I make a profit." This mindset barely held up between 2017 and 2021, but the situation has changed since 2022. The "924 Notice" issued by seven departments, multiple internal statements from the State Taxation Administration, and several public court cases all indicate that individual crypto asset gains are not completely tax-exempt. This article compiles the rules that can currently be found. Before we begin, we still recommend properly registering and completing KYC on the official Binance site to maintain complete records, which will be helpful for future proof; use the official Binance APP for mobile; iPhone users can install it via the iOS installation guide. Now let's get into the main topic.

This article does not constitute tax or legal advice. For final decisions, please consult a licensed tax professional.

1. Overview of Current Regulations

Currently, there is no specific "cryptocurrency tax law" in China. Relevant rules are scattered across various documents:

Document / Source	Core Content
2017 "September 4th Announcement"	Bans ICOs and shuts down domestic exchanges
2021 "924 Notice"	Overseas platforms providing services to domestic residents is considered illegal financial activity
Article 2 of the "Individual Income Tax Law"	Income from property transfers and incidental income are both taxable
Ministry of Finance Document No. 35 (2008)	Individuals buying and selling virtual currency online are taxed at 20% under "income from property transfer" (originally for in-game currency but often applied by analogy)
Statements from Local Tax Bureaus in 2025	Audit cases requiring "back payments of individual income tax on USDT trading spreads" have started to appear

Simply put: Unclear regulations ≠ No taxation. Tax authorities citing "income from property transfer" or "incidental income" to tax crypto gains are legally justifiable.

2. Tax Risks Classified by Behavior

Behavior A: Holding Long-Term Without Selling

Merely holding does not trigger a taxable event. However, keep in mind:

No cash flow doesn't mean there are no "unrealized paper gains."
When selling in the future, taxable income will be calculated as "selling price - purchase cost."
On-chain rewards during the holding period (staking, airdrops) are considered "taxable upon receipt" in many countries. While not explicitly defined in China yet, it's safer to keep a record.

Behavior B: Exchanging USDT for Fiat (C2C)

Risk points:

Bank transactions receiving RMB from selling USDT will be monitored by risk control and tax authorities.
There are known cases in 2024-2025 where local tax authorities pursued retroactive taxes, claiming a 20% individual income tax on the spread.
If you are doing high-frequency arbitrage or large volumes (annual cumulative ≥ 300,000 RMB), you need to be particularly vigilant.

Behavior C: Crypto-to-Crypto Trading Profits

Legally, every crypto-to-crypto trade is "exchanging one type of property for another" and can be viewed as a taxable event.
In practice, because it's not priced in fiat, collection is very difficult.
But when eventually exchanged back to USDT or fiat, the accumulated profit or loss will become visible.

Behavior D: DeFi Yields / Miner Rewards

Yield farming and liquidity mining rewards: "incidental income" or "business income."
Miner rewards (although mining is considered an obsolete industry domestically): business income.
On-chain airdrops: market value upon receipt is categorized as "incidental income."

Behavior E: Overseas Salaries Paid in Crypto

Receiving USDT as a salary for remote work falls under "wage and salary income" or "remuneration for personal services."
It should be declared based on monthly progressive tax rates, up to 45%.
This is the easiest category to make compliant, but also the easiest to be flagged by the Golden Tax Phase IV system.

3. How the Tax Bureau Discovers Your On-Chain Gains

Don't assume on-chain anonymity guarantees safety:

Bank Statements: RMB deposits from selling crypto via C2C are the biggest point of exposure.
Big Data Anti-Money Laundering: The People's Bank of China's AML center has automated alerts for individual accounts with cumulative transactions ≥ 200,000 RMB in half a year, and transfers over 10,000 RMB are also monitored.
CRS Information Exchange: Your accounts on overseas exchanges, like Binance Hong Kong or Coinbase, may share information with Chinese tax authorities.
Golden Tax Phase IV: Fully launched in 2024, covering the entire chain of individual income and expenses.
Criminal Case Investigations: When buying or selling USDT involves upstream telecom fraud funds, the police will trace the funds right to your link in the chain.

4. Compliance Strategies

If you do have gains and want peace of mind:

Keep Complete Records: Retain the time, amount, and counterparty information for every purchase, sale, and on-chain transfer.
Source Compliance: Trade through licensed platforms in Hong Kong or Singapore to leave bank records that can prove legitimate sources of funds.
Overseas Status: If you live abroad long-term (meeting the 183-day non-resident tax status), you can pay taxes according to local rules.
Voluntary Declaration: If you reach a certain amount (e.g., annual profit ≥ 100,000 RMB), it's advisable to consult a tax professional for voluntary declaration, paying 20% under "income from property transfer" to avoid future worries.
Corporatization: High-frequency trading could be handled by holding via a Hong Kong limited company with a 16.5% profits tax, or using BVI/Cayman offshore structures (high cost, requires professional services).

5. Publicly Disclosed Penalty Cases

2024 Case in Zhejiang: An individual accumulated 8 million RMB over 3 years via C2C. The tax bureau categorized this as "business income," resulting in back taxes, late fees, and fines totaling 2.2 million RMB.
2025 Case in Beijing: An employee received 500,000 USD in USDT from an overseas company without declaring it. Tax recovery and fines amounted to approximately 3 million RMB.
There aren't many public cases yet, but none end in "acquittal."

6. Several Common Misconceptions

"USDT is not currency, so it doesn't count as property." Wrong. Supreme People's Court precedents have repeatedly recognized the "virtual commodity" attribute of virtual currencies, meaning they can be protected as property under the law and also treated as taxable property.

"I only stay on-chain and haven't touched bank cards." On-chain behavior isn't directly seen by the tax bureau, but when you eventually need to spend money to buy a house or a car, you still have to go through fiat channels. Tracing it back then will make it harder to explain.

"I use someone else's card to receive funds." This constitutes proxy collection and may involve the crime of assisting information network criminal activities or even money laundering, which carries a much greater legal risk.

FAQ

Q: Is it too late to pay back taxes now? A: You still can. Voluntarily declaring to the competent tax bureau and paying back taxes plus late fees usually won't incur additional fines. However, if you wait until an audit discovers it, you'll face fines ranging from 50% to 5 times the amount.

Q: Can I completely avoid taxes by using an overseas identity? A: It depends on your "tax resident" status. China's Individual Income Tax Law taxes the global income of tax residents, while non-tax residents are only taxed on income sourced within China. The determining criteria are "domicile + habitual residence."

Q: Do I need to count DeFi wallet earnings? A: Legally, yes. In practice, there's currently no mandatory declaration mechanism, but you should keep good records.