Digital Currency exchanges in South Korea may become ineligible for tax benefits, usually offered to small companies.
On Monday, the South Korean government has proposed an amendment to an existing tax law which would eliminate cryptocurrency exchanges from being considered as startups or small and medium enterprises (SMEs). Such categories were usually granted tax benefits up to 100%.
As per an existing tax law of the country, startups, small and medium enterprises can apply for deduction ranging from 50-100% of their income tax or corporate tax for the period of first five years after their establishment. Post which, such startups and SMEs can avail a deduction of 5-30%.
However, the government has decided that the cryptocurrency platforms are not eligible to avail the benefits, owing that the transactions brokerage does not necessarily result in value additions.
The government has decided to submit the amended bill for debate in the National Assembly on 31st August, after which the decision on whether and when the legislation would be implemented would be taken.
However, in order to help emerging technologies, the government has decided to keep blockchain startups working in the field of research and development under the purview of tax benefits.
The government has been active in the regulation of cryptocurrency and blockchain technology in its country. In May, the government declared that it would be setting up a taxation system for investors.
As per the current law, cryptocurrencies are not regarded as financial assets in the country. So the government is thinking of transferring the cryptocurrency exchanges under the regulation of Financial Intelligence Unit (FIU), thus making it obligatory for them to follow the KYC standards as commercial bank.
At the end of June, the Financial Services Commission prepared a new initiative to combat the frequent money-laundering cases using cryptocurrencies. Under the instruction, regional and local banks of the country are now ought to keep a track of all accounts of customers under cryptocurrency and blockchain categories.