South Korea’s National Tax Service (NTS) decided to withhold tax worth 80.3 billion won or $70 million from the Bithumb. It is worth mentioning that Bithumb is the country’s largest crypto exchange.
Yesterday, Vidente the largest shareholder of Bithumb Holdings which operates the Bithumb Korea, confirmed this information. Also, according to Vidente, the tax will be imposed on its foreign clients.
Based on the information, this is the first time in the tax agency’s history; it imposed a tax on gains from cryptocurrency transactions. However, Vidente plans to challenge this decision and it expects that final payment is subject to adjustment.
Let’s have a look at how the National Tax Service calculated the amount of tax. It was calculated based on the rate for miscellaneous income, which is an irregular income like lottery gains. Also, the is collected at an annualized rate of 22%, based on the amount of foreign withdrawals from Bithumb.
South Korea and crypto exchanges
It is important to mention that in December 2017, the Korean government made the decision to ban foreigners from opening accounts on crypto exchanges. However, this ban failed to solve this issue as foreigners are still using the country’s trading platforms.
Foreigners are using fake names to circumnavigate this problem. It is not easy for crypto exchanges, identity from which countries their clients are from, and how much profit they generated from this activity. As a result, it creates questions about the among of money calculated by South Korea’s National Tax Service.
At the moment, Korea’s Income Tax Act does not recognize cryptocurrency transactions and there are no clear rules about the crypto taxations. However, the Ministry of Economy and Finance stated it would introduce crypto regulations in 2020. Also, South Korea’s s central bank plans to hire experts to study distributed ledgers, cryptocurrencies, and crypto money backed by the central bank.