In January of 2018, South Korea announced that it will start taxing cryptocurrency exchanges. This is a highly important development in international tax law concerning cryptocurrencies, because South Korea is a major hub for cryptocurrency trading. Let’s delve a bit deeper into South Korean cryptocurrency taxation.
South Korean Cryptocurrency Taxation of Exchanges
The first important point to make is that the new law affects only South Korean cryptocurrency exchanges, such as Bithumb and Coinone.
South Korean Cryptocurrency Taxation Starts With Tax Year 2017
The new South Korean cryptocurrency taxation will apply retroactively to any income derived from digital currency in the calendar year 2017. In other words, any profits the exchanges realized in 2017 on the trading of cryptocurrencies will be subject to the South Korean corporate taxation.
South Korean Cryptocurrency Taxation Rates
There is no new special tax rate created for cryptocurrency exchanges. Rather, the current corporate income tax rates will apply. In other words, the cryptocurrency exchanges are likely to pay a 22 percent tax rate for corporate profits exceeding an annual threshold of KRW 20 billion and an additional 2.2 percent local income tax (which constitutes 10 percent of the corporate income tax rate).
South Korean Cryptocurrency Taxation Deadlines
The deadline to pay the corporate income tax for the tax year 2017 will be March 31, 2018. The deadline to pay the 2017 local income tax will be April 30, 2018.
South Korean Cryptocurrency Taxation is Part of the South Korean Overhaul of the Cryptocurrency Market
The extension of corporate taxation to cryptocurrency exchanges is part of a major overhaul of the entire South Korean cryptocurrency market. In fact, the South Korean government has instituted a number of non-tax measures to address concerns about money laundering and tax evasion. For example, South Korea recently prohibited the opening of new virtual accounts for cryptocurrency investors while the cryptocurrency traders are required to change the names of their accounts to make them identifiable.
Cryptocurrency Trading is Taxable in the United States
Sherayzen Law Office reminds US taxpayers cryptocurrency exchanges are taxable in the United States as capital gains. Contact Sherayzen Law Office to schedule a consultation to learn more about US taxation of cryptocurrencies.