WSJ wrote last week that China will impose a personal income tax of 20 percent 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.
The policy would cover China’s legions of online gamers, who can use online virtual currency to buy better equipment and new powers for their online warriors. But it also affects millions of others who use virtual currencies on instant-messaging services and Web portals. For example, users of Tencent Holdings’ popular QQ chat service can earn Q-coins they can use to purchase online game equipments and buy e-gifts. Statistics from research firm iResearch show that China’s virtual currency market is growing at a yearly rate of 15% to 20%, and several billion yuan worth of virtual money is traded in the market.
The fast growth already has raised fears among China’s policymakers, who last year restricted the conversion of virtual currency into yuan. Among other reasons cited in this Chinese language Xinhua report, they feared the practice could lead to inflation as well as money-laundering.
The report says the tax doesn't affect internet companies, so I guess the owners of Chinese gold farms/sweatshops won't lose any sleep over this.