In December, we reported that Bithumb was planning to sue the National Tax Authority, South Korea’s tax body. This was after the tax body imposed an arbitrary tax of nearly $70 million on the exchange. According to a local media report, the exchange has made good on its threat.
The Matter is Before the Tax Tribunal
After the nation’s National Tax Service imposed a $70 million fine on the exchange, the exchange has taken the matter before the nation’s tax tribunal. Bithumb wants the tribunal to declare the tax null and void. The tribunal will give its ruling in 90 days.
According to Bithumb, the decision to tax the exchange is not based on any law. Bithumb argued that crypto was not legally recognized in the nation and as such, the NTS had no jurisdiction to tax crypto trading activities.
According to a representative of Bithumb, they have already paid the full amount imposed on them and they are now preparing their arguments before the tribunal. The NTS imposed a withholding tax of nearly $70 million, which is a tax paid by the business rather than those who received the income. This tax is usually deducted directly from their income. As a result, the exchange had no choice but to pay the $70 million tax before it could send any funds to its customers.
When issuing the tax, the NTS classified the crypto trading activities of foreigners on the exchange as miscellaneous income. Consequently, it categorized it as a capital gains tax. The NTS has said that it believes the income withdrawn by foreigners is taxable. It also argues that it based its decision on the principle that where there is income, a tax should apply. Thus far, the NTS has refused to comment on the issue until after the tribunal issues its ruling.
Not Everyone Agrees
Not all South Korean officials agree with this decision. According to Choi Hwoa-in, an adviser to the nation’s Financial Supervisory Service, there is no law regulating crypto in the nation. He added that the Ministry of Economy and Finance had already cleared the air on the issue. Consequently, he believes the tax is baseless.
Many experts are pointing to the fact that South Korea’s tax law does not recognize crypto. Besides that, they not that crypto are not tangible and cannot be recognized as assets. Some have pointed out that by imposing this tax, the NTS is trying to establish a solid ground for imposing a tax on the crypto sector in the nation.
The tax comes at a time when crypto trading in South Korea has been on the rise. For instance, South Korea makes up the largest market for Bitcoin trading. With this growing importance of the sector to South Korea, it has forced the tax authority to focus on the sector.
Crypto Regulation in South Korea
In general, South Korean laws have not been supportive of the crypto sector. For instance, in 2019, the nation’s Fair Trading commission ruled that crypto exchanges would bear full liability for hacks to their exchanges. The tough rules have led to unprofitability for crypto exchanges in the nation. It is estimated that over 97% of crypto exchanges in the nation are facing bankruptcy.
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