South Korea has recently proposed to start imposing taxation on digital currency incomes, planning to begin in 2021. This taxation will further apply to the processing operations to buy cryptocurrencies, as well as profits gained from initial coin offerings, or ICOs.
A new Amendment To Taxation Laws
The Ministry of Economy and Finance of South Korea has recently proposed amendments to the existing taxation laws. This amendment would see the crypto industry be incorporated within it, as well. According to a report made by E Daily, a local newspaper outlet, the Ministry will announce these proposed amendments in July. From there, they will submit them to the National Assembly in September. Should the national assembly approve these amendments, these laws will be implemented in 2021.
These amendments, which had already gained the support of the Ministry of Information and Technology, will see South Korea generate tax income through the sale of digital currencies. Transactions from cryptocurrencies alone from Bitcoin to ETH will not be subject to these taxations, however.
No Taxation From Losses
An official from the Ministry of Information and Technology had stepped forward, giving a statement about this proposed amendment. He explained that they were looking for ways to tax should there be profits made through transactions, ICOs, or mining. This, of course, will follow the principle of “Tax only where the income is,” according to the official.
The official made a further clarification, as well, stating that any transactions that incur a loss will not be subjected to these taxes, much like the country’s securities laws.
Many Loopholes Possible
Experts weighing in on this matter had some interesting things to say, however. They explained that taxation would be a difficult thing to enforce in the country, even if the national assembly passed the laws, to begin with. Seung Seung-young, a researcher at Korea Regional Tax, explained that there exists a few loopholes within this amendment. Loopholes, Seung-young believes, Bitcoin traders can exploit to skimp on taxation.
Seung-young explained that there’s a possibility of doing business through the use of peer-to-peer (P2P) transactions and refraining from going through an exchange, then avoiding taxation through that. Even if one leveraged IP tracking, administrative costs will only increase if there’s a large number of targets to track down, and it won’t be easy in and of itself, according to him.
King Yong-min stands as an official from the Korea Blockchain Association. He, however, stands convinced that the government needs a minimum of three or four years before it can fully grasp the scope of the crypto industry in Korea.