SEOL: The Korean government is mulling measures to impose capital gains tax, among other taxes, on cryptocurrency investments, according to media reports on Dec. 18.
It will reportedly convene a task force, made up of officials from the Ministry of strategy and finance, the National tax service and cryptocurrency experts to discuss tax measures on Bitcoins and other cryptocurrencies. The authorities are exploring a range of taxation options, including income tax, capital gains tax, value added tax and transaction tax, according to industry sources.
Capital gains tax is most likely, where traders will be taxed on profits from the sale of cryptocurrencies held for investment purposes, following the suit of major Bitcoin trading countries such as the US, UK and Japan. The regulators are also weighing on applying transaction taxes, similar to purchase or sale of securities on stock exchanges. The scheme, however, would require recognizing Bitcoin as a financial product. The government has stated on numerous occasions that it is neither a legitimate currency nor a financial product.
Imposing value added tax is also under consideration. By regarding cryptocurrencies as goods and services, the traders have to pay 10 percent for purchasing Bitcoins from the exchanges. But in light of the recent global trend of exempting VAT, including in Japan and the US, experts say it may be difficult to impose VAT on the traders. The taxation move comes after the government last week proposed detailed regulations on cryptocurrency trading, including ban on minors and foreigners, in a move to curb heated speculation in the world’s third largest Bitcoin trading country.
The task force will look at other tax treatments in other countries to come up with a domestic framework. The EU member states regard Bitcoins as a currency rather than property, and are therefore not subject to VAT. The US recognizes them as assets, meaning they are subject to capital gains tax for traders. In the UK, cryptocurrency trade is subject to capital gains tax, as well as corporate tax for Bitcoin mining firms.