South Korea Will Be Taxing Digital Currency Earnings by 2021
Cryptocurrency taxation has been one of the most discussed topics over the last few years. Once again, governments and tax agencies are putting more focus on crypto taxes since institutional participation is on a rise.
Starting 2021, South Korea has proposed taxing digital currency income and profits. These taxes will be applicable to all digital currency processing operations as well as the profits generated through Initial Coin Offerings (ICOs).
The Ministry of Economy and Finance of South Korea has proposed amendments to the existing taxation laws. The report from local news publication E Daily states that mentions that the Ministry will bring new amendments in July and submit it to the national assembly for approval by September 2020.
The Ministry has also said that it will exempt the taxes on the income generated from the sale of digital currencies transactions. It means that crypto-to-crypto transactions will be exempted but crypto-to-fiat transactions will be taxed.
An official from the Ministry of Information and Technology said: “We are looking at ways to tax if profits are made through transactions, mining, and public offerings (ICOs) in accordance with the principle of ‘tax where income is located”.
Moreover, just like the securities laws, loss-making transactions won’t be subjected to taxes.
While the tax agencies are mulling tax on crypto earnings, some experts think that even if the national assemble passes the crypto tax law, it will be difficult to enforce it. Seung Seung-young, a researcher with the Korea Regional Tax Institute said that there are some loopholes which the digital currency traders can still exploit.
He added: “If you do business through a peer-to-peer (P2P) transaction without going through an exchange, there is a possibility of avoiding taxation. Even with IP tracking, if there are a large number of targets, administrative costs will increase and it will be difficult to track each day.”
Kim Yong-min, an official with the Korea Blockchain Association, thinks that the government will take two-three years more to get the complete grasp of the digital currency industry.
Crypto taxes across the globe have been a subject of massive debates and discussion. Besides, South Korea is one the biggest crypto-trading Asian country after Japan.