À̹ÌÁö È®´ë The South Korean government may classify gains from cryptocurrency trading as other income such as lottery or prize-winning, which is subject to 20 percent tax.
According to multiple sources from the government on Monday, the income tax department at the Ministry of Economy and Finance recently began reviewing taxation plans for gains from virtual assets transaction. Previously, the project was under the charge of the property tax department, which oversees taxation on capital gains and gifts. The income tax department supervises taxation on incomes such as earned income, other income, and annuity income.
This change has raised speculation among experts that the government has taken an initial step on categorizing gains from trading cryptocurrencies such as bitcoins and ethereum as other income, not capital gains.
A government official said that ¡°the finance ministry is yet to finalize its direction but it surely has become more likely for the income from virtual asset trading to be labeled as other income, not as gains from transfer of capitals like real estate properties.¡±
Under local tax law, other incomes include honorarium income, prize winnings such as money received from winning lottery and others that are infrequent, unusual and significant in size. Other income is subject to 20 percent-tax on 40 percent of total other income. The remaining 60 percent of the income is tax-deductible.
Once labeled as other income, the Korean tax bureau will be allowed to impose tax on gains from virtual asset trading immediately. To tax as capital gains, in contrast, the government must receive information on virtual asset trading from cryptocurrency exchanges to obtain grounds for taxation on the gains and it should calculate fair market price. The revision of the related law is currently under review at National Assembly as the country is seeking to reform related law to tax cryptocurrency gains this year.
Meanwhile, the Korean tax authority has already started labeling gains earned by foreigners from trading virtual assets as other income and has been collecting duties indirectly through cryptocurrency exchanges.
The National Tax Service (NTS) in November slapped the country¡¯s largest cryptocurrency exchange Bithumb Korea with a tax bill of 80.3 billion won ($69.3 million) as a follow-up to its conclusion that Bithumb failed to fulfill its duty of withholding taxes of its foreign customers. Withholding tax refers to income tax paid by the payer of the income rather than the recipient, with the tax typically withheld or deducted from the income in advance.
Under local tax laws, income payer is required to withhold taxes on any income incurred by foreign residents from selling assets in Korea. To tax Bithumb, the NTS categorized cryptocurrency trading of foreigners as miscellaneous income, recognizing capital gains from crypto trading as ¡°assets.¡±
Bithumb, however, plans to take legal actions against the taxation.
By Pulse
[¨Ï Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]