The South Korean Ministry of Economy and Finance recently addressed the confusion regarding the profit taxation conducted through cryptocurrency trading. South Korea issued a short notice, simply stating that Korean crypto traders are not obligated to pay taxes based on their earnings from cryptocurrency trading.
However, the government is considering international trends. Moreover, major countries’ approach to cryptocurrency taxes to amend existing Korean tax laws, including cryptocurrencies.
Interestingly, the Ministry is currently controlled by the country’s Liberal Korean Party. The party has been supporting relaxation regulations regarding cryptocurrency trading for a long time. They are also well-known supporters of blockchain technology and its development.
Not all capital gains from financial investments are taxable in Korea. The Korean Ministry of Economy and Finance formally declares that the profit of cryptocurrency trading by individual investors cannot be taxed under applicable tax laws. In addition, the government announced that we cannot tax income from activities not included in tax law. Furthermore, we cannot tax transactions until the law includes the term “virtual currency”, or its synonyms.
However, while current laws do not see crypto earnings listed as income, many are wondering if this could change in 2020 or later.
The Ministry of Economy and Finance has made every effort to amend tax laws so that they can be taxed while individual crypto profits are currently exempt from taxes in Korea. A ministry official said that discussions were ongoing and that the proposed bill would soon arrive, probably in the first half of 2020.
The ministry’s officials certainly are aware of the shortcomings of tax laws now, even if they didn’t. Some sources believe that the Ministry is currently working on developing and proposing a new amendment that will cover this flaw and include cryptocurrency taxes as soon as possible.
Some key decisions must be made before tax laws can be amended. These include a true definition of crypto assets, whether profits should be classified as capital gains. Moreover, the way the government plans to obtain transaction records from cryptocurrency exchanges to accurately tax. Emphasizing that cryptocurrencies will need legal status before they can be added to the law, the Ministry said:
“We are preparing a taxing scheme for virtual assets by a comprehensive review of the taxation of major countries, consistent with accounting standards and trends in international discussions to prevent stop money laundering”.
National Tax Service (NTS) has imposed a tax of 80.3 billion won in tax deduction for transactions while domestic cryptocurrency transactions are not taxed. Foreign customers of Bithumb Korea make this transaction one of the largest cryptocurrency exchanges in the country.
Kim Woo-Cheol, a tax professor at Seoul University, said that Bithumb could pay 80.3 billion won and then collect the money from foreign customers. But it is practically impossible. According to local media reports, Bithumb has withheld taxes from foreign customers and is preparing to file a lawsuit against NTS for a baseless tax on the company.
Korea’s Tax Agency to Withhold $ 70M From Crypto Exchange Bithumb
South Korea’s National Tax Service (NTS) will deduct a tax of 80.3 billion won, or US $ 70 million, from Bithumb’s largest cryptocurrency exchange.
AZCoin News reported on Dec, 30, the largest shareholder of Bithumb Holdings, operating Bithumb Korea, confirmed the amount of money held in a notice and said the tax would be imposed on foreign customers. However, that may not really happen.
This is the first time the country’s tax authority has imposed taxes on profits from cryptocurrency transactions, the report said.
According to the Korea JoongAng Daily report on Monday, the Korean announcement, Bithumb Korea is planning to take legal action against tax requirements so that the final payment can be adjusted in the future.
The tax amount is calculated based on the ratio of miscellaneous income, i.e. irregular income like lottery gains, Korea Joongang Daily wrote. Taxes are collected at an annual rate of 22 percent, based on foreign withdrawals from Bithumb.
Read more:
- Bank Of Korea Doesn’t Have Immediate Plans To Launch A Central Bank Cryptocurrency
- The Korean Government Will Levy Income Tax From Cryptocurrency