Good news for cryptocurrency traders in South Korea as profit generated from crypto trading will not be subjected to tax, according to a recent announcement from the country’s Ministry of Finance and Strategy.
The Ministry clarified that the current tax law does not consider crypto trading gains as taxable income; thus, Korean crypto traders are not required to pay taxes on the profits they earn from crypto trading for the time being.
However, crypto traders in the country may not be exempted from taxation for a long time. An official of the Ministry said that the Ministry is aware of the loophole in the current tax law, and they are currently reviewing the regulations in major foreign countries so that they can amend theirs in an effective way.
“The income tax law is only taxable on income listed as taxable. We are preparing a taxation plan for virtual assets by comprehensively reviewing the taxation of major countries, consistency with accounting standards, and trends in international discussions to prevent money laundering,” the Ministry said, confirming its position on the crypto taxes.
Legal Status of Crypto in South Korea
Digital currencies currently have no legal status in the country. For crypto to be added to tax law, South Korea first needs to clarify certain issues such as the definition of digital assets and its legal status, whether or not to categorize crypto profits as capital gains, and how to obtain trading information from crypto exchanges for tax purposes.
The amendment would require South Korean exchanges to implement Know-Your-Customer (KYC) for its users in order to collect accurate information about the trading activities of each trader.
Bithumb to Pay $69.5 Million as Tax
Although crypto trading activities conducted by local traders are currently not subjected to taxation, South Korean tax regulator, National Tax Service (NTS) has ordered Bithumb, the largest crypto exchange in the country to pay 80.3 billion won ($69.5 million) for withholding taxes of its foreign customers trading on Bithumb Korea.
It is still unclear how the NTS was able to identify trades made by Bithumb’s foreign users unless the regulator has information like the customers’ phone number and their country codes.
Bithumb is reportedly taking legal actions against the imposition. The exchange stated that it is not proper because it pays corporate and local income taxes annually.