South Korea Quashes Reports of Blockchain Transfer Tax

Trust Bloomberg Tax's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.

By Elaine Ramirez

South Korean officials have denied reports that they will implement a 24.2 percent transfer tax on cryptocurrency or require cryptocurrency exchanges to share users’ cryptocurrency transaction data as fears over the impending regulations are sparking a slew of unconfirmed news.

After local newspapers on Jan. 22 reported the government was evaluating or had confirmed that it would levy a transfer income tax on profits gained through cryptocurrency, the Ministry of Strategy and Finance released a statement that there were “no conclusions regarding cryptocurrency taxation measures.”

“Cryptocurrency taxation relation issues are currently being handled by the Cryptocurrency Taxation Task Force as tax data securing methods are being explored through different means such as overseas cases,” the statement said.

Steve Ahn at Seum Law said the exchanges, which are corporate entities, would naturally be required to pay corporate income tax on their profits anyway.

“The tax payable on their corporate income was never a controversial issue. What is uncertain and still a hot issue is how crypto transactions will be taxed between buyers and sellers (VAT as goods, capital gains, etc.),” Ahn told Bloomberg Tax Jan. 22.

For several weeks, South Korea has run a pan-government cryptocurrency regulation task force to mull actions against money laundering, fraud and other illegal activity. The local cryptocurrency market, one of the world’s largest, has been on edge since Justice Minister Park Sang-ki on Jan. 11 claimed the government was drafting a bill to wholly ban cryptocurrency trade in the country.

Last week, Financial Services Commission chairman Choi Jong-ku told lawmakers that regulators were considering a blanket ban as well as only banning the exchanges that were acting illegally.

Deputy Prime Minister Kim Dong-yeon also said in a Jan. 16 radio interview that the government was working on taxation guidelines and a real-name verification system on cryptocurrency.

Data Sharing

Separately, financial regulators denied a Jan. 21 report that the government would require cryptocurrency exchanges to share users’ transaction data with banks. The news article claimed that as field investigations have allowed banks to confirm whether cryptocurrency handling companies manage records of traders’ transactions, financial and tax authorities can have access to cryptocurrency traders and their transaction records. The article also said the government would ban “honeycomb accounts,” which are single accounts used by multiple individuals that are disguised as operating funds for companies that handle cryptocurrency.

“The Korea Financial Intelligence Unit (KoFIU) is in the process of forming a guideline for cryptocurrency-related money laundering prevention requirements for financial companies. However, the guideline specifics have not been confirmed,” the Financial Services Commission said in a Jan. 21 statement.

“Financial authorities have not explored means to look into traders’ user transaction data,” the statement added.

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

Request International Tax