Korean blockchain lobby calls for crypto tax plan to be put on ice

The Korea Blockchain Association wants the government to postpone the implementation of its new tax framework until 2023.

The Korea Blockchain Association has called for the government’s new 20% crypto trading tax plan to be delayed for another two years.

According to an Oct. 14 report from News1 Korea, the Korea Blockchain Association, or KBA, is requesting regulators postpone the South Korean government’s implementation of its long awaited new tax strategy until Jan. 1, 2023.

The KBA doesn’t explicitly state it is against the 20% tax rate but said that crypto exchanges and companies in the industry need a “reasonable period” to prepare for the Income Tax Act.

One of KBA’s reasons for the delay is due to a short window between regulations applying to the old tax scheme and the start of the new one. Crypto exchanges would be allowed to report on trades falling under the previous tax code until the end of September 2021. But the KBA is arguing that since Korea’s Ministry of Economy and Finance set the revised code to be enforced starting on Oct. 1, 2021, it would be difficult to comply with the new regulations in potentially less than 24 hours. 

Korea Blockchain Association chairman Oh Gap-soo implied that as this was the first time the government had gotten involved in taxing digital assets, a temporary suspension of the tax code might be necessary. Regulators might not immediately accept reports from crypto firms, leading to uncertainty as to whether they can continue to operate in October.

“The industry is having a great deal of difficulty in preparing for taxation because it is not equipped with a tax infrastructure in a situation where it is uncertain whether or not the business will continue ahead of the enforcement of the Special Payment Law.”

He added that: “It is necessary to provide a reasonable minimum period of preparation so that it can contribute to the national economy and to secure tax revenue in the long term.”

Under the new tax plan, gains made from virtual currencies and intangible assets will be classified as taxable income, calculated annually. Income from virtual assets below $2,000 per year falls below the minimum threshold and will not be taxed. Any income generated from cryptocurrency trading above this threshold, however, will be taxed at a set rate of 20%.

Modifications to existing tax law are likely to impact many businesses across the country. Recently, four of the five top banks in Korea announced they would be introducing “crypto-asset services.” In addition, at least one exchange is partnering with a major bank for fiat to crypto trading.

“The industry is in line with the principle to tax income from virtual assets and will actively cooperate,” a representative for the KBA stated.

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South Korean Police Investigate Who Leaked the Crypto Tax Bill

Sejong police are investigating who leaked details of the government’s crypto tax bill before it was formally announced.

The South Korean police have launched an investigation into the source of leaked information about the government’s new crypto tax legal amendments. Social media users and private blogs had revealed details of the changes before it was made official this week.

According to the Kyunghyang Shinmun, the first article featuring leaked information was published in a state-themed site, which rapidly spread across the crypto communities, and was picked up by other media outlets.

The Metropolitan Investigation Team of the Sejong District Police is leading the search into who leaked the full details of Seoul’s plans. It’s not the first time that local authorities have had to deal with the leaking of cryptocurrency-related legal changes,

Between 2017 and 2018, local media outlets ran a series of stories with details about the plans to regulate the overheated crypto sphere within the country. The police found out that officials from the Korean Customs Service and communication managers from the Prime Minister’s Office were involved in the leak.

The bill needs to be approved first

Following a Tax Development Review Committee meeting on July 22, the Ministry of Economy and Finance published its revised tax code detailing the new rules.

The bill includes a proposal to set a tax of 20% on crypto traders’ earnings, if they are over $2,100 during a fiscal year.

Traders whose earnings are below $2,100 would not need to pay tax, according to the bill. Other proposed amendments include classifying cryptocurrencies as “goods” rather than currencies.

If parliament approves the measures, they will come into force in October 2021.

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