South Korea has confirmed that income tax can’t be levied on individual investor’s profits from crypto transactions under the current tax law. However, the government is reviewing international trends. And the approaches of major countries to crypto taxation to amend the existing Korean tax law to include cryptocurrency.

Crypto Profits No More a Subject of Taxation in South Korea

The South Korean Ministry of Economy and Finance announces officially that crypto trading profits of individual investors can’t be taxed under the current tax law. Not all capital gains from financial investments are subject to taxation in South Korea. Additionally, the government announces that we can’t impose taxes on income from activities that aren’t in the tax law. Further, we can’t tax transactions until the law includes the term ‘virtual currency’ or its synonyms.

Amendments Are Under Discussions

While individuals’ crypto profits are currently tax-free in South Korea, the Ministry of Economy and Finance has been pushing to amend the tax law so they can be taxed. An official of the ministry said that discussions are going around and the revised bill will soon come; probably by the first half of 2020.

However, some major decisions may come early into effect anytime before the tax law is amended. The officials say. Maybe it includes the precise definition of crypto assets or the decision on whether or not to include profits in the category of capital gains. Also, how the government plans to obtain trading records from crypto exchanges to accurately levy taxes.

When emphasizing that cryptocurrency would need legal status before it becomes the law, the Ministry elaborated that:

We are preparing a taxation plan for virtual assets by comprehensively reviewing the taxation of major countries, consistency with accounting standards, and trends in international discussions to prevent money laundering.

National Tax Service Targets Foreign Traders Using Domestic Crypto Exchanges

While domestic crypto transactions aren’t taxed, the country’s National Tax Service (NTS) has imposed 80.3 billion won in withholding tax on trades. Foreign customers of Bithumb Korea conducts this trade which is one of the largest crypto exchanges in the country.

Kim Woo-Cheol is the tax professor at the University of Seoul. He says that Bithumb can pay 80.3 billion won and afterward collect the amount from its foreign clients. But it’s practically impossible. According to the local media reports, Bithumb hasn’t withheld taxes from its foreign customers and is preparing to file a lawsuit against the NTS over a groundless tax imposed on the company.

Issue of Categorizing Crypto Profits as Capital Gains

The NTS categorizes crypto gains of foreign traders as miscellaneous income. In contrast, earnings from real estate and stock trading are categorized as capital gains. Capital gains tax is collected for every deal; however, the govt collects tax for miscellaneous income once in each year.

Ahn Chang-Nam is the tax professor at Kangnam University. He believes that it is realistically difficult for the government to know about every crypto transaction. It seems like the NTS took a practical approach in categorizing gains from crypto-asset trading as miscellaneous assets.

Last month Ukraine gives a green signal to crypto payments and investments considering the new crypto tax bill.

What do you guys think about South Korea’s approach to crypto taxation? Let us know in the comment section!