South Korea’s tax agency, the National Tax Service (NTS) recently slammed Bithumb, one of the country’s largest cryptocurrency exchanges, with a whopping tax bill of $69.3 million. According to the NTS, the tax bill covered withholding taxes of foreign clients owed by the crypto exchange. In another development, however, South Korea confirmed that the country’s tax laws do not allow for the taxation of profits from virtual currencies.
$69.3 Million Bill
According to a report by South Korean local news outlet, Pulse News on Monday, December 30, 2019, Bithumb’s largest shareholder, Vidente Co., revealed in a document that the NTS had imposed a tax bill of nearly $70 million (80.3 billion won) on Bithumb.
The NTS, on the other hand, accused the exchange company back in January 2018 of falling short of its tax duty by not reporting withholding taxes of its clients abroad. The South Korean tax agency calculated Bithumb’s tax by classifying virtual currency trading of foreign clients as “miscellaneous”.
This is the first time that the government of South Korea would impose tax on crypto trading. There are currently no clear-cut tax regulations regarding virtual currency trading in the country. Although there has been no official statement from Bithumb, the South Korean crypto exchange is reportedly gearing to contest the tax bill legally.
Tax Holiday for Crypto Traders in South Korea
While the NTS is imposing an almost $70 million tax bill on Bithumb, there is a new development regarding taxation on crypto trading in South Korea. Per a report by The News Asia, the country’s Ministry of Finance and Strategy came out to stated that the current tax laws do not cover the taxation of profits gotten through crypto trading.
An excerpt from the official announcement reads:
“The Income Tax Act accounts for the taxation only of taxable income… and personal cryptocurrency transaction gains are not currently items listed as income, and therefore are not taxable.”
The Ministry is controlled by the Liberal Korean Party which is a supporter of cryptocurrency and blockchain technology development. Also, in support of the nascent industry, the party has for a long time, called on the government to put in place ‘relaxed’ laws for crypto and distributed ledger technology (DLT).
Furthermore, the ministry, aware of the loopholes in the current tax laws, is working towards introducing a more robust amendment that would solve the inadequacies in the current tax laws.
According to a statement from Minister Kyoil Choi:
“The cryptocurrency industry should be incorporated into the institutional sphere for the sake of transparent transactions.”
Tightening Crypto Taxation Policies Around the Globe
Although profits gotten from crypto trading were excluded from South Korea’s crypto tax laws, the country is looking to ensure proper virtual currency tax reporting in 2020. As reported by BTCManager earlier in December 2019, the South Korean government is planning to present a bill to the country’s National Assembly proposing the taxation of crypto capital gains.
More countries are beginning to tax the crypto market as they feel that the nascent industry has come to stay. However, most jurisdictions do not have a thorough understanding of the crypto and blockchain sector, thereby rolling out tax regulations that seem to confuse virtual currency holders.
In the United States, the Internal Revenue Service (IRS) has been breathing down hard on the necks of crypto holders to report their income without a crystal-clear crypto tax regulation. Back in July 2019, the IRS sent out 10,000 warning letters to virtual currency holders asking them to accurately report transactions.
Japan’s Tokyo Regional Taxation Bureau is also on crypto tax evaders and would offer stringent penalties to offenders.