Cryptocurrency and taxation laws are creating a great deal of confusion in South Korea.
On Dec. 30, South Korea’s government stated that under current law, it cannot impose income taxes on individuals’ profits from transactions of cryptocurrency. This, however, contrasts with the National Tax Service’s recent imposition of an 80 billion won ($68.9 million) tax bill on local crypto exchange Bithumb Korea.
On Dec. 29, The Korea Herald reported that South Korea’s local tax agency received 80 billion won ($68.9 million) in taxes from the exchange. The following day, Choi Kyo-il, a lawmaker of the Liberty Korea Party and member of the National Assembly’s Strategy and Finance Committee, received information from the Ministry of Strategy and Finance addressing the issue of taxation and cryptocurrency. The document showed that under the current tax law, individuals’ profits from cryptocurrency transactions are not subject to taxation since they are not listed in the income tax law.
According to the ministry, South Korean income tax law contains an enumeration that only levies on income listed under taxation. Since individuals’ profits from virtual currency transactions are not listed income, these earnings do not fall under income tax taxation.
Unsurprisingly, Bithumb is planning to file to avoid paying the bill, as taxation rules have not yet been applied to the cryptocurrency trading industry.
While the South Korean government has said they are holding off on imposing taxation on earnings from digital asset trading, legislation is in the works.
South Korea’s previous Ministry of Strategy and Finance has confirmed that it will levy taxes on virtual assets through a tax code revision bill at a later date, as it’s impossible to impose income taxes under the current income tax law.