Crypto Exchange Bithumb Go to Court Over $69.1 Million Tax

Bithumb, a large South Korean cryptocurrency exchange, has decided to litigate an 80.3 billion won ($69.1 million) tax imposed by the National Tax Service (NTS).

On January 15 the Korea Times published a report, which stated that the Bithumb crypto exchange filed a complaint with the Tax Tribunal against the NTS over a ”groundless” tax which the exchange is supposed to pay. The company argues that, regarding current legal regulations, cryptocurrency is not a currency, therefore the authorities lack any right to impose taxes of any kind. In 90 days the Tax Tribunal will announce its decision as to whether to grant or dismiss Bithumb’s complaint.

The NTS imposed a withdrawing, or retention tax — a tax paid to the income by the payer of the income, not the recipient. Applied predominantly to employment income, the tax is withheld in most jurisdictions, as the Korea Times puts it.

Therefore, Bithumb is expected to pay the tax before distributing the income to its customers. A representative of the crypto exchange commented:

“We paid the full amount and have since been preparing for arguments. We believe we will be given a chance to clarify our stance in court.”

The NTS stated that gains which are withdrawn in Korean won from foreigner’s accounts are also subject to taxation, which gives the authorities the right to impose the tax.

Choi Hwoa-in, an adviser to Financial Supervisory Service, 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, especially since it is still awaiting the ministry opinion on the same matter it sought again.”

Will South Korea introduce clear tax regulations?

According to the North Korea Times, Choi believes that the case with Bithumb may be a maneuver deployed by the NTS in an attempt to impose taxes on income which was not taxable before. She added, that as cryptocurrency trading gains more popularity in South Korea, regulators have begun to consider the income from it as the one which is subject to taxation.

Earlier it was noted, that a robust legal framework concerning crypto taxation is underway in South Korea. The Ministry of Strategy and Finance confirmed, that taxes will be levied in the future, since under the current law digital assets are not taxable:

“In the case of a corporation’s virtual currency transaction, all transactions that increase the entity’s net assets are subject to taxation under the current law, so it is taxable, but it is practically impossible to produce tax revenue results by distinguishing only virtual currency transactions.”

Taxes are a stumbling block for crypto investors worldwide

The complex nature of digital assets as entirely new asset class has sparked countless battles between investors and regulators globally, as the latter failed to create clear or any guidance regarding cryptocurrencies.

Moreover, failure to comply with these intricately tangled guidelines can result in massive fines for investors. American holders who do not report their crypto income and investments, are under threat of heavy penalties and even criminal investigation.