November 4th, 2008 by Benjamin Duranske
The Wall Street Journal’s China Journal reports that China is directly taxing profits made on sales of virtual currency, apparently whether or not the virtual world or game provider affirmatively supports “real money trade” in its game or virtual world. From the WSJ post:
The State Administration of Taxation said on its Web site Wednesday (in Chinese) that China will impose a personal income tax of 20% on profit from virtual money. 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.
There’s actually not much debate over the whether profits made on sales of virtual goods and currency are taxable in most jurisdictions (at least upon conversion to real cash) but it’s interesting that China has moved to specifically capture this revenue, and has even created rules governing collection.
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