South Korean ministries have pledged to impose tax on cryptocurrency trading and crypto mining “from next year.”
Per reports from E Daily and Decenter, the Ministry of Economy and Finance is preparing to make an amendment to the existing Income Tax Act that will include clauses about taxing profitable cryptocurrency sales, as well as the profits of crypto mining projects. The ministry also spoke about taxing the proceeds of initial coin offerings (ICOs) – perhaps a slightly puzzling statement for some, as ICOs remained banned in the country.
The media outlets quote an official from the ministry as saying,
“We are looking into ways to impose capital gains tax or other forms of income tax on the profits earned by both domestic and foreign investors using cryptocurrencies.”
The ministry says its proposed amendment will be ready by July and submitted to parliament in September.
It looks as though the ministry’s plans, which have also received input from the Ministry of Science and ICT, will be designed in the image of existing securities tax laws, which only seeks to tax profit-making deals, rather than transactions that make a loss.
Crypto-to-crypto transactions will also likely be exempt, and the ministries are expected to follow a policy of imposing taxation wherever income or profits can be found.
As previously reported, Seoul has already introduced a new crypto law that contains provisos pertaining to exchanges, who may have to provide data to tax officials as part of a set of new regulatory measures that comes into force in Spring 2021.
Seoul has spoken about imposing crypto tax on numerous occasions in the past, most notably back in late 2017 and early 2018, although none of its previous plans have come to fruition. However, in a highly contentious move last year, tax authorities in the country hit exchange Bithumb with a USD 67 million tax bill for transactions carried out by its overseas customers.
There could be further obstacles for the new plan, though. E Daily quotes an official from the Korea Institute of Local Finance as stating that individuals who want to evade taxes will be able to do by making use of over-the-counter (OTC) exchanges.
A blockchain industry chief, meanwhile, stated that the government should instead hold fire on its tax plans until it has developed a more effective way of calculating tax bills, payable in fiat, on crypto transactions – a process that could take “up to three to four years.”