In South Korea, tax experts gathered and proposed a transaction tax on cryptocurrency before leaping straight to an official income tax.
South Korean tax experts have advised the Korean government to apply a low-level trading tax on cryptocurrency profits before subjecting citizens to a transfer income tax, according to a Business Korea report. The Korean government is expected to announce its tax reform plan in late 2020.
The low-level trading tax was recommended because there is a lack of legal infrastructure to enact transfer taxation.
During a seminar on Feb. 21, members of the Korean Tax Policy Association advised the South Korean government to enact this two-step plan, arguing that taking a deliberative approach to implementing a cryptocurrency income tax will be most effective.
The Korea Blockchain Association agreed with the tax experts’ proposal, justifying their recommendation by noting that:
“Related laws are still absent and the taxation infrastructure is still insufficient to cover cryptocurrencies and, as such, some supplements need to be added on the expense calculation side.”
The Association also added that before imposing a transfer tax, clarity on defining cryptocurrency acquisition costs is necessary. But it’s not easy to define these since cryptocurrencies are being traded at multiple rates on a wide variety of exchanges in Korea.
Taxes on cryptocurrency in South Korea are inevitable
Cointelegraph reported last month that South Korea’s Ministry of Economy and Finance is considering imposing a 20% tax on income from cryptocurrency transactions. It is reported that a more concrete tax framework for cryptocurrencies is on the way in South Korea. South Korea’s previous Ministry of Strategy and Finance commented last month that:
“In the case of a corporation’s virtual currency transaction, all transactions that increase the entity’s net assets are subject to taxation under the current law, so it is taxable, but it is practically impossible to produce tax revenue results by distinguishing only virtual currency transactions.”