Jeff Fawkes is a seasoned investment professional and a crypto analyst. He has a dual degree in Business Administration and Creative Writing and is passionate when it comes to how technology impacts our society.
Earlier South Korean crypto exchange Bithumb had reported about a bad financial year, but now it has been revealed that the taxes are getting even harder.
South Korean National Tax Service sent Bithumb a letter claiming they will need to pay additional taxes for the 2019 fiscal year. The agency claims that the tax is legal because the exchange forgot to pay the taxes from withdrawals that the exchange is constantly processing for customers from abroad.
Doo Wan Nam, MakerDAO Business Development Associate says that Bithumb had a net loss of $180 million in 2018, considering the data given by Korea Times. This means that regulators are taking the money from people who experience significant troubles. Troubles are coming partially from the bear market side, and partially because of bad management.
Per the reason behind such a weird tax, the authorities said that Bithumb needed to deduct taxes from the traders. The users from other countries were supposed to pay the taxes directly into the exchange’s budget.
Regulators Forgot about Foreigners Taxation in Recent Draft Bill
Yes, some of the Korean deputies finally got themselves to writing additions to the tax laws. Parliamentary Affairs Committee approved the first version on November 25, 2019. Now, Congress must give it the final approval, despite the new version of the law has no guidelines on foreign customers’ taxation.
So, still no changes to the Korean Income Tax Law, as well as to the trading laws. South Korea will see no legal status for Cryptocurrencies if they come from abroad. Maybe, it’s worth waiting till the November 25 law passes final hearings?
There is not technical functionality or software that will properly tax foreigners said Bithumb representative. The industry expert O Kims, working as lawyer attorney at Kwon Oh Hoon noted:
“Even if a foreigner is a resident, the same laws as the Koreans apply, so that taxation is not possible uniformly. Even if taxation is imposed on foreigners, it is burdensome to put a taxable disposition on domestic workers.”
It is impossible for the exchange to strictly determine whether a user is visiting the website from South Korea or he is using a VPN. Bithumb will defend itself against the court orders, lawyers say.
The regulatory pressure comes when South Korea has a lack of cryptocurrency regulation. The government didn’t put enough time into developing strict rules of taxation. Instead, they are trying to impose some shady laws and clamp down on firms with big wallets. Many other governments do so when it comes to crypto regulation and precise taxation. For instance, governments of some of the post-USSR countries simply confiscate the coins from whales when they can. Sometimes low-level officials, sometimes big men do the crime.
Imposing taxes on something that has no definition in base laws opens a big window for theft, misrepresentation, and manipulation.