South Korea Prepares to Tax Bitcoin Use

south korea prepares to tax bitcoin use - South Korea Prepares to Tax Bitcoin Use



Regulation

South Korea is preparing to tax bitcoin use after the cryptocurrency’s trading volume skyrocketed past that of Kosdaq. Han Seung-hee, the commissioner of the country’s National Tax Service, told lawmakers this weekend that the issue of how to best tax cryptocurrencies is being discussed, including the areas of capital gains tax, the VAT, and gift tax.

Also read: South Korea Bans All Initial Coin Offerings

Korea To Tax Bitcoin Use

1508087171 910 south korea prepares to tax bitcoin use - South Korea Prepares to Tax Bitcoin Use
NTS Commissioner Han Seung-hee.

South Korea’s lawmakers held a National Tax Service (NTS) hearing in Sejong on October 13. The NTS Commissioner Han Seung-hee answered questions about the taxation of cryptocurrencies, particularly about bitcoin.

He was asked, “as the daily transaction value of virtual money grows beyond the Kosdaq, we must actively cope with the shift away from the conventional reservations. What is the taxation plan?” Business Post reported. The Commissioner then replied:

I am still taxing business income, and I am discussing whether to tax the value-added tax or capital gains tax with regard to virtual currencies such as bitcoin.

1508087171 961 south korea prepares to tax bitcoin use - South Korea Prepares to Tax Bitcoin Use

According to Han, his department is currently discussing the VAT and capital gains tax issues with the Ministry of Strategy and Finance. In addition, he said that “the gift tax will be reviewed as it needs to be supplemented,” the publication detailed. The Commissioner pointed out that the use of bitcoin may lead to gift tax evasion, therefore valuations methods need to be implemented with respect to the taxation of cryptocurrency gifts.

In the meantime, he confirmed that “we are currently monitoring the status of the [cryptocurrency] transactions and will move forward quickly.”

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South Korea’s Crypto Regulatory Efforts

During the Saturday hearing, the lawmakers pointed out that Japan has classified digital currencies as “general assets or services and treat them as subject to excise tax,” Business Post detailed.

“Bitcoins can be used for purchasing goods, etc., and profits arising from using them will be subject to income tax” in Japan, the Japanese National Tax Agency explained, adding that:

Gains and losses (gains or losses recognized on the basis of relative relationships with foreign currencies or foreign currency) arising from the use of bitcoin, as a general rule, except for cases arising in association with acts that cause various incomes such as business income, are classified as miscellaneous income.

Han also mentioned that “the United States is actively responding to the taxation of virtual money as an asset” and profits from their transactions are taxed. “We have to be proactive like the United States and Japan,” he emphasized.

1508087171 308 south korea prepares to tax bitcoin use - South Korea Prepares to Tax Bitcoin Use

South Korea has been working on their regulatory framework for digital currencies. In August, a “Bitcoin Regulation Act” was submitted by lawmaker Park Yong-jin but no action has been taken on it.

The regulators then met in early September to discuss how to deal with digital currencies. They came up with some measures such as making cryptocurrency exchanges conduct due diligence and implement stricter verification processes. In addition, the Ministry of Science and ICT and Korea Communications Commission announced that they will conduct on-site inspections of cryptocurrency service providers including bitcoin exchanges. Then, at the end of last month, the government announced that all initial coin offerings (ICOs) are banned in South Korea.

READ  JPMorgan's Jamie Dimon Slams Bitcoin As "Fraud"

How do you think South Korea will tax bitcoin use? Let us know in the comments section below.


Images courtesy of Shutterstock and News 1.


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