Eventually, after a series of events and an urgent call from the Financial Services Commission, the South Korean government announces the introduction of new changes for the exchanges of the region.
This is the type of news the main Korean exchanges would have rather not be informed about. It seems that the various petitions, including those of Park Yong-jin to the National Assembly, have been heard. The South Korean labor activist had stipulated that many changes in income taxes and corporates taxes should be created to fight against tax evasion. Result: Under this amendment, exchanges will no longer be able to benefit from income tax and corporate tax cuts enjoyed by a large portion of local SMEs. Most disturbingly, lawmakers seem to advocate a tax on capital gains that companies would generate on sales of cryptocurrencies.
Previously, government officials said they were hesitant and openly admitted that any change in law would be seen as a sign of weakness on their part or perceived as an extremely strict position towards the crypto-sphere, an impression they did not want to give.
Would this perspective have changed?
The lethargic state, but also the reluctant attitude of “stressing” the world of cryptos has nevertheless evolved after the attacks and hacks of the exchanges. Let’s mention here the $30 million stolen from the Bithumb platform or the $ 40 million that went up in smoke on Coinrail. Hence, it is surely the consequences of these acts that have called into question the “laissez-faire” that prevailed until then.
From now on, the keyword will be “taxes“
It is in this perspective that the government has announced its proposal to revise the tax laws for the current year. Therefore, on the official statement, it reads: “from next year, SMEs active in cryptocurrencies will no longer benefit from tax cuts, privilege nevertheless kept for other sectors“.
Korean media News 1 explains that crypto companies were considered venture capitalists ,or as SMEs, until now. Categorized as such, these entities benefited from a significant reduction in income taxes. Examples of beneficial tax treatments include the depreciation of assets acquired during the first four years of operation. Nevertheless, these accounting entries could indeed change.
The media states:
“With regard to the tax exemption, income tax, and corporate income tax, these are reduced from 50% to 100% for five years for start-ups, SMEs, insurance companies and VCs“
Cryptos companies will now be excluded from the categories benefiting from tax exemptions, because “cryptos trading does not create added value“.
Tax rate reviewed
Currently, the tax rate of cryptos in South Korea is around 22%. This one will probably be increased … “Considering that the platforms have generated significant amounts of money during 2017 and during the current year, the amount exempt from all taxes would be considerable“.
We can read a little further:
“The Bitsum exchange generated an estimated net profit of more than 250 billion won (US$ 217,17 million) last year. It is expected to pay 54.4 billion won (US$ 47,27 million) in taxes, but should save 27.2 billion won (US$ 23,65 million) with 50% exemption “. No directive has yet been established.
When we think that the Korean Blockchain Association was worried about the security of these platforms and that the two Korean monitoring committees – KCC & KISA – highlighted the potential violations of data privacy rights by crypt operators we then see a whole new concern on the part of the government.
Is the local government thinking in any way of getting its shares of it?