The South Korea government has announced that they will be collecting a 22% corporate tax and a 2.2% local income tax from all cryptocurrency exchanges in the country. The announcement, according to Yonhap, was made in the morning hours of January 22nd.
This announcement comes after the South Korean Justice Minister’s unofficial banter in which he said that the government is considering a possible ban on the use of bitcoin and other cryptocurrency. This statement triggered huge sell-offs and pull outs that are now being definitively connected to the crash in Bitcoin prices over the last week. In which, Bitcoin touched a low of $10,000. It was only last Christmas season during which Bitcoin peaked to its highest ever price, at $20,000.
The aftermath of the statement made by the justice minister was faced with huge public outcry from the South Korean people. Who went on to file a petition, with the required 200,000 signatures, as a sign of protest, requesting the government to reconsider the rumoured stand. Later on that day, however, the President’s office issued a statement stating that no official stand had been taken nor was it agreed upon.
The South Korean government, over the last year, has stepped up its game in terms of laws surrounding the crypto-world. By first banning the use of anonymous virtual accounts, then banning the creation of new ones and issuing warnings forbidding foreigners and underaged investors from trading on their exchanges.
While the official announcement of taxation is a great step towards legalizing cryptocurrency in the country, the timing is curious for yet another reason. The South Korean government has also just wound up an unprecedented money laundering probe into six of the country’s major banks. Whose result went on to show that there was a thirty-six time increase in the commissions from virtual accounts that were linked or connected to cryptocurrency exchanges.
South Korea has slapped a 24% tax on all cryptocurrency exchanges in the country. The break down of which is 22% in corporate tax and 2.2% in local income tax.This tax percentage is well within the country’s pre-existing tax laws and is the same as the percentage demanded from other companies.
Incidentally, the largest global exchange, Bithumb, is also based out of South Korea. It accounts for $2.8 billion of daily trade volume and according to sources, made close to 317.6 billion won in total in the year 2017. Out of which they are expected to pay around 60 million won in tax.
The exchange was also in recent news for having been hacked into. Their reported loss was about $7.1million in mainly BTC and Ether. The security breach is being attributed to North Korean hackers.
What Does This Mean?
This announcement, made today, comes as a breath of fresh air to all cryptocurrency investors and traders in the country for more than one reason.
Firstly, it solidifies the progress that South Korea has made towards integrating, if not legalizing, the use of cryptocurrency.
Secondly, it means that the ban was merely a speculative gimmick, if not at worst a successful attempt at market manipulation, and was never really on the South Korean Government’s agenda.
Thirdly, since there was no policy changed required to include these exchanges under the existing tax laws, South Korea may well become an example for the rest of the world to follow in the matters of taxing and dealing with cryptocurrency.