Business 31 July 2018Gerald Fenech
South Korea may soon strip tax perks from crypto exchanges
Cryptocurrency exchanges in South Korea are poised to lose the tax benefits granted to smaller companies, if the government has its way.
On Monday, the South Korean government proposed a revision to the country’s existing tax law that would remove crypto exchanges from the small and medium enterprise (SME) category, CoinDesk Korea reported.
This category, which consists of startups and small businesses, enjoy between 50% and 100% in tax cuts in the first five years after starting their operations, and 5-30% after that period. The government, however, decided that crypto platforms did not meet the category’s requirements since “cryptocurrency transaction brokerage is not effective in generating added value.”
Government officials plan to present a draft revised bill to the National Assembly on August 31. The bill will undergo a parliamentary debate before a decision can be made on whether to update the existing legislation or not.
The proposed revision only applies to crypto exchanges, as the South Korean government appears still keen on supporting blockchain and other emerging technologies in the country. Recently, the government noted that blockchain startups focusing on research and development would still be eligible for tax cuts.
In June, reports surfaced that the country’s Ministry of Strategy and Finance was considering a 10% capital gains tax for cryptocurrency trading activities. The ministry, however, denied the report, saying, “We have already decided to tax profits from investments in cryptocurrency. The question is only how much time we should give investors and when to start implementing it.”
Although known for its stance that cryptocurrencies are neither financial nor investment products, the South Korean government has been warming up to cryptocurrencies. While it is pushing for regulation, it is also working to ease cryptocurrency trading regulations. The moves come following a great deal of speculation at the beginning of the year that the country was considering a complete ban on digital currency.
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