South Korea-based cryptocurrency exchange Bithumb appears to be gearing up for a new attempt to file for an Initial Public Offering (IPO) in its home country. Earlier this week, South Korean news source Money Today reported that the crypto exchange was working towards a potential IPO application in the country.
Moving Ahead Despite Tax Issues
The news medium’s report provided vague details concerning the possible IPO. For instance, there were no details on likely company valuations or even when the filing would be. However, it did reveal that the exchange’s operating company, Bithumb Korea, had tapped capital market operator Samsung Securities to be its underwriter.
Officials in the country reportedly believe that an IPO would improve the exchange’s reach, while also bolstering cryptocurrency adoption in the country. Despite the optimism, however, Bithumb will have to consider a significant factor that would impede this filing. The company has dealt with taxation obscurity for a while, as it has entered a dispute with the National Tax Service (NTS) over the right tax amount.
Earlier this year, Bithumb sued the tax authority to court after the latter had hit it with an 80 billion won ($69 million) tax bill. As the Korea Times reported at the time, Bithumb claimed that the tax bill was baseless, since the country’s tax laws didn’t recognize crypto assets as legal currencies.
The NTS had imposed a retention tax – an income tax that the government gets from the payer of the income, not the recipient. In most cases, the tax is deducted from income. As a consequence of the tax, Bithumb had to pay the bill before distributing its remaining income to shareholders. The tax agency also claimed that gains taken from foreigner-owned accounts on Bithumb were taxable. So, it had the right to impose such taxes.
New Tax Laws Could Abate the Tension
Choi Hwoa-in, an advisor to the Financial Supervisory Service of South Korea, sided with the exchange. In a statement at the time, he said:
“Bitcoin under the current law is not an asset. It is clear and simple. […] The Ministry of Economy and Finance already made that clear. The NTS pushing ahead with the tax imposition is baseless and groundless.”
However, it’s worth noting that the exchange could get some taxation aid from the South Korean government. Local news source E Daily reported last month that the country’s Ministry of Economy was preparing an amendment to its income tax laws. The change could include rules for crypto sale profits and profits from national crypto mining projects.
The report specified that crypto-to-crypto transactions would most likely be exempt from the amendment, as the government was merely seeking to tax for-profit transactions.
The ministry also added that it would be considering capital gains tax or other income taxes earned by both domestic and foreign investors on virtual currency transfers. An official from the Ministry of Information and Technology further pointed out that they would execute the principle of taxation on the logic of “taxes where income is located.”
While the tax issue isn’t the only problem that Bithumb would face on its road to a possible IPO, solving it will be a significant step in the right direction.