Capital Gains or Transaction Tax for Cryptocurrency in Korea
Tax law experts in Korea commented yesterday, while government officials deliberated over the issue, that cryptocurrency trading should be taxed as capital gains. Some commented further that a flat tax per transaction would be most appropriate. Currently the Ministry of Strategy and Finance classifies cryptocurrency as ‘other income‘ which would put it in the realm of income tax if a tax law were passed today.
The discussion based on the amendment to the Special Fund Act was held at National Assembly’s Virtual Currency Taxation Symposium co-hosted by the Korea Blockchain Association.
Byungil Kim, professor of economics at Kangnam University presented three ways to tax individual’s cryptocurrency income via capital gains, income tax, and per-transaction tax. He insisted on finding an alternative to the ‘other income’ delineation that cryptocurrency trading currently holds. “[It’s hard to think that cryptocurrency income is a temporary and accidental income,]” he said, “[and a transaction tax is easier to collect than capital gains tax and can suppress speculative transactions,]” but a rule pertaining to that would have to be passed separately.
It was also argued by others that Korea should follow the precedent set by other countries such as the United States and Japan who tax cryptos based on capital gains because income from cryptocurrency should be regarded as income from a rise in capital. Attendees agreed that by making taxation simpler, the volume of trades can actually increase because the uncertainty of entering the market has been removed. Adding a clear tax scheme to the law in regard to cryptos removes a barrier to entry for newcomers to the market.
Youngmin Kim from the Korea Blockchain Association agreed. “[it is appropriate to follow the trend [of taxing cryptocurrency as capital gains] because other major countries see crypto income as capital gains.]”
Meanwhile, others commented that it would be even more appropriate to introduce a lower transaction tax than capital gains tax, the same way securities are taxed in Korea. There was no voice at the symposium to back the position of the Ministry of Strategy and Finance who classifies cryptocurrency gains as other income.
Youngmin Kim also took shots at the Korean IRS’s decision to levy a hefty tax on Bithumb’s foreign trade volume. He claimed that it seems inappropriate to tax nonresidents because “[without taxation on residents, taxing non-residents can create international friction in that it is discrimination between Koreans and foreigners.]”
The consensus at the symposium which was voiced by Chairman Gapsoo Oh from the Korea Blockchain Association was, “[we hope that a balanced tax system will be implemented so that the blockchain and virtual currency market can… lead to significant development in the economy.]”
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