Despite the fact that many cryptocurrency aficionados do not like regulation, it seems South Korea is set to introduce taxation guidelines in July 2018, as the most recent G20 meeting seems to kick off future taxation guidelines.
It can be recalled that cryptocurrency transactions used to be tax-free in South Korea due to a lack of tax regulations as citizens were able to profit millions in earnings from cryptocurrencies without paying taxes on them until the tax authorities rectified the situation by setting up “a virtual currency taxation standard in the first National Tax Administrative Reform Committee in 2018”.
The South Korean government then announced on January 22, 2018 that it would be collecting a 22 percent corporate tax and a 2.2 percent local income tax from the country’s cryptocurrency exchanges which was in line with the South Korean tax code for all corporations that make a yearly income of over $20 billion won ($18.7 million USD). Also, it should be noted that the government banned the use of anonymous virtual accounts, froze the opening of new virtual accounts, and forbade underage and foreign users from trading on exchanges.
On March 25, the Fuji News Network (FNN) reported that the Ministry of Strategy and Finance, South Korea is planning to release a taxation framework for cryptocurrencies by the end of June.
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However, the Ministry of Strategy and Finance later issued a statement, saying that, “we are currently considering the taxation data through virtual currency taxation task force regarding virtual currency taxation,” pointing that the media report was “not true.”
According to the well-known local newspaper, The Financial News, the government is planning to set up currency regulations at the end of June, after the elections.
Financial News stated:
“Meanwhile, the government plans to set up a full-scale virtual currency regulation right after the June 13 local elections. The Ministry of Finance and Economy will hold an international financial conference on virtual currency and blockchains for G20 members on June 14th in Seoul and will hold a second working session on the G20 international financial system on the 15th”
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The Financial News also reported that South Korea’s Ministry of Taxation looked into cryptocurrency approaches in other countries around the world by sending a group of people to several countries around the world, including the United States, Germany, the United Kingdom and Japan to survey their varying crypto tax frameworks. It was discovered that taxation is applied “based on the principle that there is a tax on income,” as opposed to non-income taxes, according to FNN, with each country having a different vision and background.
Financial News also stated:
“Currently, the US and the UK are taxed with capital gains tax, Japan with miscellaneous income, and Germany with other income. It is because the characteristics of virtual money were different in each country, such as payment means, monetary ability, financial assets, and so on. However, these countries have found that there are few cases where actual tax is imposed, as opposed to taxation based on the principle that there is a tax on income.”
This is a remarkable development by the country, and it will be interesting to see the new crypto-taxation rules and regulatory guidelines that will be announced in the future.
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