South Korea is to tax digital currency under plans confirmed by a senior government minister this week.
In the latest clampdown from tax authorities on digital currency trading, Finance Minister Hong Nam-Ki told a parliamentary finance committee the government would introduce a taxation regime for digital currency, with more specifics about the plan to be released in the coming weeks.
Hong said the government “has continued to realign its tax system to reflect changes in market conditions, but it is especially working to refine its list of taxable items and types of tax this year.”
Back in January, it was reported that the South Korean government was considering a 20% tax on digital currency gains, leading to speculation that these would be treated as “other income” under Korean tax law. As a result, digital currency transactions would not also incur capital gains tax.
The Korean Tax Policy Association offered an alternative model, with a two-step structure combining a trading tax at a lower level, as well as a secondary digital currency income tax. It is not yet clear which, if either, of these models the government is pursuing.
Addressing the committee, Hong said the government had been taking part in international discussions about developing a new structure for digital taxation.
Expressing his personal support for the moves, the finance minister said it was likely to lead to greater tax receipts from foreign companies operating in South Korea’s digital currency markets.
However, Hong also acknowledged the regulations could lead to a higher tax burden for local digital currency firms, including creating fresh tax liability in foreign jurisdictions.
The new plans come after Korean exchange Bithumb appealed against its $69 million tax bill, on the grounds that South Korean law does not currently recognize digital currency as an official currency in the country.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
