KBA: “Cryptocurrency taxation should be delayed until 2023”

Today Kapsoo Oh, President of the Korea Blockchain Association, asserted that taxation on cryptocurrency in South Korea should not begin until 2023.

Per the recently passed Special Reporting Act, cryptocurrency taxation as income tax would begin in October of 2021. The KBA contends that that is much too early to implement the tax scheme since cryptocurrency businesses will need a more adequate grace period to prepare for the change.

In July, the Ministry of Strategy and Finance issued a final proposal for the upcoming tax bill regarding cryptocurrency transactions. Under the proposed bill, cryptocurrency gains above a gross roughly equal to $2000 would fall under the income tax law. The proposal fills a gaping hole in the current tax scheme which roundly excludes cryptocurrency gains as taxable income but which also amounted to undue confusion among citizens and South Korea’s own National Tax Service (NTS).

The contention by the KBA maintains that since cryptocurrency exchange sites in particular would be on the hook for hefty tax bills as a result of the proposal, they will need an extended grace period to ensure compliance. The Special Reporting Act requires exchanges to collect detailed KYC information their users in order to appropriately levy taxes on their transactions. The thorough collection of that data, which won’t be required until October of next year, will be a systematic undertaking too great for exchanges to come into compliance with until both the Special Reporting Act is implemented and guidelines for the new tax bill are laid out.

Kapsoo Oh pointed out that in addition to the collection of extensive KYC data from users, the required implementation of expensive ISMS certification and access to real-name bank account contracts with select domestic banks present a daunting situation for the industry. Couple those difficulties with the fact that detailed guidelines for how exchanges can comply with the tax law have not yet been issued, and it becomes clearer where the KBA’s frustration stems from.

The KBA’s opinion on the matter of crypto tax law will apparently be sent to the National Assembly Planning and Finance Committee where the relevant tax bill was discussed and sent for review.

The KBA announcement comes days after the NTS director doubled down on his confidence that the Bithumb tax bill should stand. He added to it by saying that other major domestic exchanges should incur similarly large tax burdens based on the transactions made by non-resident foreigners on their respective platforms.