South Korean tax experts have advised the Korean government to apply a low trade tax to cryptocurrency profits before citizens are subject to a transfer tax, according to a Business Korea report. The Korean government is expected to announce its fiscal reform plan by the end of 2020.
The low level trade tax was recommended because there is a lack of legal infrastructure to levy transfer tax.
At a seminar on February 21, members of the Korean tax policy association advised the South Korean government to implement this two-step plan, arguing that a deliberative approach to implementing an income tax for cryptocurrency will be most effective.
The Korea Blockchain Association agreed to the tax experts’ proposal and justified their recommendation by noting that:
“Related laws are still absent and the tax infrastructure is still insufficient to cover cryptocurrencies and as such some supplements need to be added on the cost calculation side.”
The Association also added that before a transfer tax is levied, clarity is needed when defining acquisition costs for cryptocurrency. But it is not easy to define them because cryptocurrencies are traded with multiple rates on a wide range of exchanges in Korea.
Reported last month that the Ministry of Economy and Finance of South Korea is considering levying a 20% tax on income from cryptocurrency transactions. Reportedly, a more concrete tax framework for cryptocurrencies is underway in South Korea. South Korea’s previous Ministry of Strategy and Finance noted last month that:
“In the case of a company’s virtual currency transaction, all transactions that increase the net assets of the entity are taxed under current legislation, so it is taxable, but it is practically impossible to produce tax revenue results by distinguishing only virtual currency transactions. “