Amidst all the hullaballoo currently going on in the South Korean cryptocurrency market, a local media publication Yonhap News has recently reported that the government has arrived at a decision to collect 24.2% of local and corporate income tax from local exchanges this year as a “measure of tax enforcement”.
With a crazy rush of investors registering on crypto exchanges and given concerns over issues connected with money laundering and tax evasion, the South Korean government banned the opening of any virtual accounts on the exchanges last month and even asked the existing virtual currency traders to change their virtual accounts to the ones with real names.
Under the existing laws for Income Tax in South Korea, local corporations are asked to pay 2.2 percent of local income tax and 22 percent of corporate income tax on any income over 20 billion won (US$18.7 million). An official from the Ministry of Strategy and Finance said that cryptocurrency exchanges are required to pay local tax on income earned last year by end of April while the corporate tax on income earned by end of March.
According to Yujin Investment & Securities, with this rule, South Korea’s one of the biggest cryptocurrency exchange ‘Bithumb’ will be paying around 60 billion won, which will be combined of corporate and local income tax with an estimated earning of 317.6 billion won last year. Along with Bithumb, there are other cryptocurrency exchanges like UpBit, Coinone, and Korbit who have reported tremendous earnings last year.
In response to the news that arrived today, Financial Services Commission said in a statement:
“Korea Financial Intelligence Unit announced that financial companies are in the process of drawing up a guideline to prevent cryptocurrency-related money laundering, although any specific measures are yet to be confirmed.” It further added that “The financial authorities have not looked into any measure to monitor cryptocurrency users’ transaction data.”
A lot of confusion has been built around in the past two weeks about regulating cryptocurrency trading in the country. Earlier, the Ministry of Justice stated that a new ban will probably be introduced on trading activities in the country. The news created a lot of FUD within the investor community resulting in Bitcoin and many other altcoins correcting heavily.
This led to a huge uproar from the country’s investor community, who formed an online petition for “unjustifiable regulations” on the presidential office’s website, which has managed to garner more than 220,000 e-signatures as on Jan 22. Later, South Korea’s presidential office confirmed that the government has “not finalized” on any such decision about banning cryptocurrency trading activities in the country.
Moreover, in another report, government officials of South Korea have been alleged the nefarious activity of insider trading. The South Korean Financial Supervisory Service (FSS) has already started an investigation of this case and promised to make all findings on the case of illegal trading of cryptocurrency by its staff members publicly available.
In order to take action on this matter, just yesterday, a new bill, which requires public officials to declare and disclose their investments in cryptocurrencies including Bitcoin, has been introduced. Chung Dong-yong, a member of the South Korean National Assembly’s Administrative and Security Committee, responsible for introducing this bill, stated:
“We need to investigate whether we have taken unfair profits and disclose the status of our assets.”
Under the recent development of several regulatory measures, South Korea’s largest bank ‘Kookmin’ has announced suspense of any deposit and withdrawal at crypto exchanges by the end of January. However, in a surprise move, the second largest Korean bank ‘Shinhan’ bank has decided to support investors stating that it will allow to deposit and withdraw money to and from exchanges.