Tax Loophole Closing For South Korean Cryptocurrency Exchanges
The South Korean government is working on taxing cryptocurrency transactions. While the media reports that up to 24.2 percent taxes will be collected this year from crypto exchanges, the regulators say that the tax rates have not been decided.
Also read: South Korean Officials Caught Trading On Insider Knowledge of Crypto Regulations
What Tax Rates Apply To Crypto Exchanges?
The South Korean government is working on how to tax cryptocurrency exchanges. The Korea Times quoted an official of the Ministry of Strategy and Finance revealing on Monday, “Virtual money exchanges will have to pay taxes. But we have yet to decide the exact tax rates as we are in talks with the National Tax Agency.”
Yonhap, however, reported that “The government said Monday it will collect up to 24.2 percent of corporate and local income taxes from South Korea’s cryptocurrency exchanges this year.” The news outlet also quoted an official saying:
Virtual currency exchanges should pay the corporate tax on income earned last year by the end of March and the local income tax by the end of April.
Following media reports, the government posted a notice on its website quoting the Ministry of Strategy and Finance, stating, “In relation to virtual currency taxation, we are currently considering the method to secure taxation data…it has not been decided yet.”
Imposing Corporate and Income Taxes
The Korea Times explained that in South Korea:
All companies reporting more than 20 billion won have to pay 22 percent and 2.2 percent of corporate and local income taxes out of their revenues under the relevant laws. But the rules were not applied to exchanges.
However, recently the regulators emphasized that some taxes are possible under the current law, as news.Bitcoin.com previously reported.
The crypto exchanges that will pay the most taxes are the country’s two largest exchanges, Bithumb and Kakao-backed Upbit. At the time of writing, Bithumb’s 24-hour trading volume is $3.14 billion whereas Upbit’s is $2.97 billion, according to Coinmarketcap.
In the first 7 months of last year, Bithumb reported 49.23 billion won (~USD$46.3 million) in earnings on 49.27 billion won sales. According to Yujin Investment & Securities, the exchange’s 2017 estimated earning is 317.6 billion won (~$298.5 million). Based on this estimate, Bithumb could be paying about 60 billion won in corporate and local income taxes, according to Yonhap.
Earlier this month, the Korean National Tax Service launched a tax investigation into Bithumb and Coinone. The Hankook-Ilbo described, “The government is considering ways to impose a capital gains tax on virtual currency investment returns.”
What do you think of the Korean government taxing cryptocurrency exchanges? Let us know in the comments section below.
Images courtesy of Shutterstock, the Korean government, and Bithumb.
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