Tax experts in South Korea have proposed a gradual tax imposition as the country readies itself for cryptocurrency taxation later this year. The experts believe that the country should first apply a low level trading tax on cryptos before gradually rolling out the proposed transfer income tax.
The experts from the Korean Tax Policy Association (KTPA) believe that imposing a gradual taxation plan would serve the country best and enable a smooth transition. Speaking during a recent seminar, they expressed their support for the government’s plan to impose transfer income tax on profits derived from crypto trading. The transfer income defined in the country’s Income Tax Act should include cryptos through prior legislation, Business Korea reports.
The proposals from KTPA, which acts as a consultancy body advising the government on matters taxation, differ from many other jurisdictions, such as the U.S. which treats cryptos as property for the purposes of taxation.
The Korea Blockchain Association expressed support for the recommendations, noting that the current infrastructure isn’t equipped to handle crypto taxes. In its statement, the industry body remarked, “Still, 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 expense calculations should include peripheral costs such as the crypto acquisition costs, the association believes. This would ensure that transfer income taxation is possible after trading tax imposition.
It added, “Acquisition costs need to be clarified for transfer income tax imposition, but cryptocurrency acquisition costs are hard to clarify because the currencies are traded in various exchanges and related information and data are restricted.”
It first emerged that the South Korean government was planning to impose income tax on crypto gains in January this year. As CoinGeek reported, the government intends to treat crypto gains as it does earnings from lotteries or other prizes – imposing a 20% tax on those gains. It will also categorize crypto income under ‘other income’, a category reserved for income that the government considers infrequent or unusual.
South Korea intends on setting the pace for crypto taxation globally, a sector that’s yet to be mastered by any country. The U.S has been working to find the best solution, with a bipartisan bill submitted last month seeking to finally allow the IRS to tax crypto accordingly. The Virtual Currency Tax Fairness Act of 2020 exempts crypto owners with fortunes below $200 from having to report to the IRS.
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