South Korean Government Plans to Strip Away Substantial Tax Benefits For Bitcoin Exchanges
The South Korean government announced a new set of tax amendment which will strip away substantial tax benefits for bitcoin exchanges.
According to a proposed revision to the existing tax law which was published in late July, companies engaged in virtual currency activities will no longer be eligible for income and corporate tax deductions that are granted to smaller companies from next year.
Cryptocurrency exchanges in South Korea have been considered as venture capital firms or small and medium-sized businesses (SMEs) so far which are able to apply for a deduction of 50-100 percent of income tax or corporate tax during the first five years after their establishment, according to CoinDesk Korea.
The government has decided to eliminate tax benefits for crypto exchanges “because the cryptocurrency trading business lacks the effect of creating added values”. The revised draft bill will be submitted to the National Assembly, and if passed, will go into effect in 2019.
Under the current tax exemption rules,the exchanges need to pay as much as 22% of corporate tax. “ Considering that the exchanges made huge profits in the last year and earlier this year, it is estimated that the amount of exemption would be considerably large,” the publication read. For example, the net profit of the crypto exchange, BITSUM, was about 250 billion won ($223 million) last year, which would be required to pay 54.4 billion won ($48.6 million) in corporate tax. But now the exchange has saved 27.2 billion won(or2,430 USD) from a 50 percent corporate tax reduction.
In addition , local media stressed that the government will carried out more investigation and research in this issue. But since 2017, the local authorities have been considering imposing capital gains tax on the cryptocurrency trading profits, but until now no specific taxation bill has come out.