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South Korea will begin taxing profits from bitcoin (BTC) and other cryptocurrencies next year, according to local media reports.
The tax will also apply to bitcoin mining operations and income from initial coin offerings if approved by Parliament.
South Korea’s Ministry of Economy and Finance has proposed changes to existing tax legislation to include the cryptocurrency industry, with support from the Ministry of Information and Technology.
In September, the ministry will present the amendments to Parliament. Once passed, the law will go into effect in 2021, allowing authorities to tax profits generated by the sale of digital assets for cash. Exchanges between cryptocurrencies will remain tax free and, likewise, those sold at a loss.
“We are looking into capital gains tax or other income taxes on profits made by domestic and foreign investors in the transfer of virtual assets,” said an official from the Ministry of Strategy and Finance.
“The proposed tax amendment will be announced in July and presented at the September ordinary meeting,” the official added. The planned changes were prompted by the idea of applying “the tax on the place where the income is located,” the officials said.
The Korean government has attempted to tax bitcoin in the past, most recently in January, but failed to enforce the regulations, reportedly because several government ministries could not agree on whether bitcoin was an asset or not. Local cryptographic experts believe the proposed changes will suffer the same fate.
Seung Seung-young, a researcher with the Korea Regional Tax Institute, told local newspaper E Daily that the planned law is not airtight in its current format, opening it up for exploitation by investors. He has declared:
“If you do business through a peer-to-peer transaction without going through an exchange, there is a chance to avoid taxation. Even with IP monitoring, if there are a large number of targets, administrative costs will increase and it will be difficult to monitor every day. “
Kim Yong-min, president of the Korea Blockchain Association, notes that it will take three to four years for the government to create an infrastructure that truly understands cryptocurrency.
What do you think of South Korea’s proposed tax on Bitcoin? Let us know in the comments section below.
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