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Hong Kong Official: Crypto Traders Must Abide by Taxation Rule and will Face Imprisonment in case of Illicit Sales of Mining Machines

Abstract : The provisions concerning profits tax in the Inland Revenue Ordinance and the relevant case law are equally applicable to transactions involving virtual assets.

ChainDD
ChainDD

Apr 05

April 5 (ChainDD) In response to question from a member of the Legislative Council on regulation of virtual asset investment activities, James Lau, the Secretary for Financial Services and the Treasury Bureau (FSTB), said if a trade who is selling mining machines or other products related to virtual assets engages in in unfair trade practices prohibited under the Trade Descriptions Ordinance (TDO), including "false trade descriptions", "misleading omissions", "aggressive commercial practices", "bait advertising", "bait-and-switch", and "wrongly accepting payment", commits an offence, thus may be sentenced a maximum fine of of $500,000 and imprisonment for five years for conviction.

Lau noted that under the Inland Revenue Ordinance (IRO), except for profits from the sale of capital assets, profits arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong are chargeable to profits tax. Whether certain profits or gains in a particular case are chargeable to profits tax has to be considered on the basis of its own individual facts and circumstances. The provisions concerning profits tax in the IRO and the relevant case law are equally applicable to transactions involving virtual assets.

According to Lau, Police have spared no effort in combating money laundering activities and investment frauds related to virtual assets. Last year, the Securities and Futures Commission (SFC) of Hong Kong took regulation actions against many cryptocurrency exchanges and issuers of initial coin offerings (ICOs). FSTB and SFC have been closely monitoring the international regulatory development in order to explore whether it is appropriate to put virtual assets trading platform under regulation.

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