The Korean government announced a new set of tax law amendments. According to this proposal, the Bitcoin exchange will no longer be eligible for the current income and corporate income tax deductions for SMEs. Regulators have also been considering capital gains tax on sales of cryptocurrencies.
Stripping tax benefits
The Korean government announced the 2018 tax law amendment. In an official statement released on Monday, the government wrote:
Beginning next year, the virtual currency processing business will be excluded from industries that meet the tax cuts of small and medium-sized enterprises (SMEs).
News1 explained that cryptocurrency exchanges "have been treated as risk companies or small and medium-sized businesses so far," which allows them to enjoy substantial income tax breaks. The statement quotes other tax policies such as the depreciation of assets in the first 4 years:
"According to the current tax exemption regulations, income taxes and corporate taxes on corporate entrepreneurs, SMEs and venture capital firms can be reduced by 50% to 100% within five years."
Cryptographic exchanges pay higher taxes
According to news reports, the government has decided to exclude cryptocurrency exchanges from the list of entities eligible for SME tax credits. “Because cryptocurrency trading services lack the added value of creating value.” The revised tax law will be submitted to the National Assembly if Passed, will take effect next year.
Seoul Finance writes that cryptocurrency exchanges are currently subject to up to 22% corporate tax and added:
Considering that the virtual currency exchanges have made huge profits in the past year and earlier this year, the estimated exemption will be quite large.
“Bitsum exchange expects net profit of more than 250 billion won (about 223 million US dollars) last year, and should pay 54.4 billion won (about 48.6 million US dollars) of corporate tax, but it enjoys a 50% reduction, which is expected to save 27.2 billion won. (about $24.3 million)."
However, the article emphasizes:
Based on the need for more research to make decisions, the tax on the sale of cryptocurrencies has not been included in the amendment bill... Since the beginning of this year, the Korean government has been considering capital gains tax on virtual currency transactions, but has not yet issued a specific tax bill.