South Korea keeps being in the news with much confusion surrounding its crypto taxation laws. At the end of 2019, the government of South Korea said that the current tax law says it is impossible to impose income taxes on the profits coming from cryptocurrency transactions. At the same time, the South Korean National Tax Service imposed an 80 billion tax bill for Bithumb (local cryptocurrency exchange).
According to The Korea Herald, the country’s tax agency received $68.9 million from the exchange in taxes. After this happened, Liberty Korea Party’s Choi Kyo-il, received data and started talking about cryptocurrency taxation. This is when it was exposed that the law highlights that profits coming from transacting cryptocurrency cannot be officially taxed.
The current tax law in South Korea states that only the items listed can be taxed. Because of the fact that virtual currency transactions are not on the list, earnings coming from such activities are not covered. With this in mind, it should be no surprise to see that Bithumb is now trying to avoid having to pay this bill since tax laws do not apply to cryptocurrency trading.
South Korea Working On Virtual Assets Taxation
Legislation is now being worked on, even if the government is officially holding off on the imposed earnings taxation. Taxes on various virtual assets are expected according to the Ministry of Strategy and Finance. The ministry declared:
“In the case of a corporation’s virtual currency transactions, all transactions that increase the entity’s net assets are subject to taxation under the current law, so it is taxable, but it is practically impossible to produce tax revenue results by distinguishing only virtual currency transactions.
We are preparing measures to impose taxes on virtual currencies by comprehensively reviewing cases of taxation by major countries, consistency with accounting standards and trends in international discussions on preventing money laundering.”
Defining Cryptocurrency – A Necessity in South Korea
Korea Times stated that the government wants to create a bill that addresses the taxable cryptocurrency transactions in the country. This should be done in the very first 6 months of 2020. In order for this to happen, a definition of digital assets and cryptocurrencies needs to be put in place.
It also needs to be clarified if the gains that happen with cryptocurrency transactions will be similar to gains of over assets, like real estate and socks. The government has to access the trading records too. This can only happen if cryptocurrency exchanges offer them.
At the same time, in the US, clarification is in work for tax laws related to cryptocurrencies. On December 20, 8 US Congress members sent a letter to the IRS. In it, the congressmen sought clarification of tax laws for cryptocurrency. The letter stated:
“We wrote in April of this year urging the issuance of guidance for taxpayers who use cryptocurrencies and we are pleased to see that you have issued guidance and addressed many questions we posed. We are, however, concerned that this recent guidance creates many new questions related to the topics it seeks to address, namely forks and airdrops.”