Subscribe
E-Paper
 |
| gettyimagesbank |
Expectation is growing that the government will tax around 20 percent of gains derived from cryptocurrency trading, a move seeking to recognize one-off, windfall occurrences derived from the digital currency, sources said Monday.
The move was fueled by a recent switch of tasks undertaken by two divisions governing the taxation schemes under the Ministry of Economy and Finance.
The ministry recently had a division in charge of income tax take over the issue regarding taxation on cryptocurrency from a division that governs property tax.
The former deals with policies concerning earned, business, retirement and pension income as well as what is legally termed "other income," mostly derived from activities or incidents that lack regularity, consistency and stability.
Included are lottery income, lecture fees from non-employers and cash awards for literary works and other prizes.
Up to 60 percent of such income is deductible and usually 20 percent of the remaining 40 percent is taxable.
"We are not able to disclose details about ongoing matters, other than that specifics will be outlined as early as August," a ministry official from the income tax division said.
"More deliberations will be held with the property tax division to discuss how to establish grounds to tax cryptocurrencies," he added.
Categorizing them under "other income" instead of property income will make it easier for the government to levy the tax.
Property trading-derived capital gains are calculated by the difference between the value purchased and valued sold at a particular date; information unavailable without the revision of a related law.
By contrast, those categorized under "other income" can be taxed based on income value at the date of taxation.
The move coincides with the ongoing dispute between the National Tax Service (NTS) and Bithumb over 80.3 billion won ($69.1 million) in what the crypto exchange claims is a "groundless" withholding tax the agency imposed last November.
At issue is whether the Tax Tribunal will grant or dismiss a motion to nullify filed by Bithumb which maintains the digital currencies have yet to be recognized as legal and therefore are not taxable.
However, the NTS claims gains withdrawn in Korean won from accounts held by foreigners fall under "other income" and are therefore taxable ― the same grounds the ministry is seeking to establish.
A blockchain expert said clear establishment of legal grounds should precede any discussion over how cryptocurrencies should be taxed.
"The cryptocurrencies are not recognized as anything tangible, much less as an asset," Choi Hwoa-in, an adviser to Financial Supervisory Service said.
"The discussion is an attempt to identify the digital currency as a new source of taxable income, as many people have made money without paying taxes," Choi added.
