South Korea to reclassify crypto firms as startups eligible for tax cuts and other benefits
South Korea’s startup ministry proposed a new law revision that would allow crypto firms to register as venture companies. This reclassification would grant them tax reductions and other benefits.
According to a notice published on July 9, the country’s Ministry of Small-Medium Enterprises and Startups proposed to amend the “Special Act on Promoting Venture Businesses.” The amendment would have digital asset firms and other crypto-affiliated business operators no longer be restricted from registering as a venture companies.
Entities registered as venture businesses in South Korea are typically small and medium-sized enterprises or startups. These companies receive official certification from the government and are eligible for government subsidies such as tax cuts and financial support depending on factors like investment or technological advancement.
“[The amendment] will lead to the activation and expansion of the venture ecosystem and promote the fostering of the virtual asset industry,” wrote the ministry in its notice.
Before the amendment, crypto firms were banned from registering under the venture companies category. They were placed in the list of banned businesses that include gambling facilities, which are still deterred from registering for certification.
Back in 2018, Upbit’s parent company Dunamu was burdened with an additional $18 million in corporate tax due to having its venture business certification revoked by the government. Therefore, it had to forfeit the government subsidies it enjoyed. The company filed a lawsuit to contest the tax but was unsuccessful.
South Korea’s new pro-crypto stance
This policy amendment is in line with several pro-crypto initiatives launched by the government under South Korea’s new president, Lee Jae-myung. Since being sworn into office last month, Lee has pledged to support cryptocurrency assets backed by the South Korean Won and allow the nation’s pension fund to invest up to $884 billion in cryptocurrency.
In addition, Lee is working towards lifting the ban on crypto-backed exchange-traded funds. His administration hopes to allow trading for spot Bitcoin (BTC) ETFs by the second half of this year.
At the moment South Korea’s Democratic Party, the party that elected Lee as president, is currently pushing regulators to pass a working draft for the country’s first stablecoin bill dubbed “Basic Act on Digital Assets.”
