Cryptocurrency and taxation laws are creating a great deal of confusion in South Korea.
On Dec 30, the government of South Korea announced. That it could not levy income taxes on the incomes of individuals from cryptocurrency transactions under current law. Nonetheless, this compares with the recent announcement of an 80 billion dollar tax bill by the National Tax Service on local crypto exchange Bithumb Korea won $68.9 million.
The Korea Herald reported on Dec. 29 that the exchange tax received 80 billion won $68.9 million from South Korea’s local tax agency. Choi Kyo-il, a Liberty Korea Party lawmaker and member of the Strategy and Finance Committee of the National Assembly. Received information from the Ministry of Strategy and Finance on taxation and cryptocurrency issues the following day.
The document revealed that the earnings of individuals from cryptocurrency transactions are not subject to taxation under the current tax law as they are not specified in the income tax law. South Korean income tax law, according to the government, includes an enumeration that only levies on tax-listed jobs.
Since the earnings of individuals from virtual currency purchases are not reported revenue, they are not taxed on income. It is not shocking that Bithumb wants to register in order to avoid paying the bill, as tax rules have not yet been extended to the cryptocurrency trading market.
Taxes on virtual assets are in the works
While the South Korean government has said it is holding back on taxing earnings from digital asset trading, the law is in the works. The former South Korean Ministry of Strategy and Finance has announced. That it will levy taxes on virtual assets at a later date through a tax code amendment bill. As income taxes can not be levied under the current income tax law.
The ministry said all transactions that raise the net assets of the company are subject to taxation. Under the current law in the case of a virtual currency transaction of business. So it is taxable, but by separating only virtual currency transactions, it is virtually impossible to generate tax revenue.
In addition, the ministry noted that they are looking at major-country tax cases to ensure consistency across foreign patterns. They prepare legislation to impose taxes on virtual currencies through a comprehensive review of major-country tax cases. Compliance with accounting standards and developments in international discussions to deter money laundering.
South Korea needs to define cryptocurrency
According to the Korea Times, the South Korean government is preparing to establish a bill dealing with taxable cryptocurrency transactions by the first half of 2020. A specific definition of cryptocurrencies and digital assets is required in the nation.
Certain concerns that need to be explained. Include whether profits in cryptocurrency transactions are equivalent to gains in other properties, such as stocks or real estate. In addition, before going forward with tax laws, the South Korean government will also have to access trading data on cryptocurrency exchanges.
Moreover, the U.S. is also seeking clarification on cryptocurrencies and tax legislation. On Dec 20, eight members of Congress sent a letter asking the government for guidance on cryptocurrency tax laws to the Internal Revenue Service (IRS).
The letter reads, they wrote in April this year asking taxpayers who use cryptocurrencies to issue guidance. They are pleased to see that provided guidance and answered many of the questions they raised. Nonetheless, they are concerned that this latest guidance poses a number of new issues relating to the topics it seeks to address, including forks and airdrops.
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