South Korean Authorities: No Ten Percent Tax on Crypto Gains for Now
On June 22, 2018, reports emerged that the South Korean authorities were looking to categorize cryptocurrency trading profits as ‘other income’ and levy a 10% tax on them. However, the Ministry of Strategy and Finance has refuted the rumors.
A Ten Percent Tax on Bitcoin Trading?
While the vibrant, relatively crypto-friendly nation have since made it clear to virtual currency exchanges in the region that they are required to pay 24.2 percent corporate and local income taxes, there is yet to be an official statement regarding taxes on cryptocurrency trading in the region.
Surprisingly though, on June 22, local news Chosun quoted a high-ranking government official as saying “We have already decided to tax profits from investments in cryptocurrency. The question is only how much time we should give investors and when to start implementing it.”
The report also revealed authorities were pondering on including the bitcoin trading tax in the revised tax bill for 2018 and give investors a one to a two-year grace period to comply.
“Gains on investments in cryptocurrencies will be taxed at a fixed rate regardless of the amount,” Chosun reported.
Authorities Deny Crypto Trading Tax Rumors
Per a Forexlive report, the South Korean Finance Ministry has denied claims it has finalized plans to impose a ten percent tax on cryptocurrency transactions. The authorities have declared the report “is different from the fact.”
In September 2017, South Korea banned all initial coin offerings (ICOs) in the region, citing “serious concern about the fact that the current market funds are being pushed into a non-productive speculative direction.”
The move fueled speculations that authorities could also shutter cryptocurrency trading activities and send all digital currency exchanges away from the state.
To further worsen issues, the Justice Minister, Park Sang-gi hinted on January 11, 2018, that the Justice Ministry was preparing a bill that will ultimately put an end to crypto trading for both foreigners and citizens of South Korea.
Although the Ministry of Strategy and Finance quickly condemned Park’s statement, the negative pronouncement succeeded in triggering a massive selloff of cryptos at the time.
Fast forward to March 2018; The Korea Times revealed authorities were considering lifting the blanket ban on ICOs and regulate their operations instead.
“The financial authorities have been talking to the country’s tax agency, justice ministry, and other relevant government offices about a plan to allow ICOs in Korea when certain conditions are met,” a government official told Korea Times.
Similarly, on May 4, 2018, BTCManager informed a group of South Korean lawyers led by a distinguished member of the ruling Democratic party, Rep. Hong Eui-rak were making plans to formulate a bill targeted at legalizing ICOs by the end of 2018.
“The bill is aimed at legalizing ICOs under the government’s supervision. The primary goal [of the legislation]is helping remove uncertainties facing blockchain-related businesses,” Eur-rak said.
Authorities May Soon Tax Cryptocurrency Traders
Its worthy of note this is not the first time the South Korean authorities are making moves to tax crypto trading activities in the area.
In December 2017, BTCManager reported the nation’s officials had held an emergency meeting to discuss the possibility of taxing capital gains from cryptocurrency trading.
According to Business Korea, earlier in the year, the government sent officials of the Ministry of Strategy and Finance abroad to study the taxation framework of nations that had already put in place a robust cryptocurrency taxation system.
In essence, South Korea may still be interested in taxing bitcoin traders in the long run though it is yet to formulate laws to back the move at the moment.