The South Korean Ministry of Strategy and Finance is proposing a tax on profits from crypto-fiat transactions, reported a local news outlet.
The proposition was made earlier this week which also includes the sale of the token through initial coin offerings (ICO) and crypto mining organizations.
The full proposal is intended to be released in July and submitted to the assembly in September.
Under their current law, the country doesn’t impose a tax on the income generated from digital currency transactions. This is unlike the US, Germany, and Japan who treat crypto gains as taxable income. Singapore also levies value-added tax (VAT) on crypto transactions.
South Korea meanwhile is considering the capital gains tax or other income tax on the profits earned by domestic and foreign investors in the transfer of digital currencies. They are looking to apply the standard of “taxation where income is located.”
Just like in the securities trading taxation, in the event of loss, the tax won’t be applied.
However, this might not be as simple to establish the taxation policy. EDaily quoted Seung Seung-young, a researcher at the Korea Regional Tax Institute as saying,
“If you do business through a peer-to-peer (P2P) transaction without going through an exchange, there is a possibility of avoiding taxation.
Even with IP tracking, if there are a large number of targets, administrative costs will increase and it will be difficult to track each day.“
South Korea has been struggling over crypto taxes for quite some time now. In December, crypto exchange Bithumb got slammed with a $67 million tax bill that resulted in an ongoing lawsuit.
Earlier this year in March, new legislation was passed that legalized cryptocurrencies and provided a regulatory framework for them.
The same month, South Korea’s Financial Services Commission categorized cryptos as a “high-risk asset” which would prevent people DeFi platforms from operating in the country.