South Korea plans to impose cryptocurrency tax, traders, miners and ICO projects will pay taxes from 2021

South Korea’s Ministry of Finance has pledged to impose taxes on cryptocurrency trading and mining “starting next year,” Cryptonews reported May 27.

According to reports from E Daily and Decenter, the Ministry of Economy and Finance is preparing to revise the current income tax bill, which will include provisions for taxing profitable cryptocurrency traders and mining projects. The Ministry of Finance also talked about taxing the proceeds from initial coin offerings (ICOs). For some, this statement may be a bit confusing because initial coin offerings are still banned in the country.

The media quoted an official from the South Korean Ministry of Finance as saying:

We are studying how to impose capital gains tax or other forms of income tax on profits earned by cryptocurrency investors at home and abroad.

The Ministry of Finance said its proposed amendments will be ready by July and submitted to parliament in September. The Ministry of Finance plans to design them in accordance with the existing securities tax law, which only taxes profitable transactions, not loss-making ones.

Earlier media reports said that the South Korean government has introduced a new cryptocurrency law that contains restrictive provisions related to exchanges. As part of a series of new regulatory measures that will take effect in spring 2021, exchanges may have to provide relevant data to tax officials.

The South Korean government has mentioned the introduction of a cryptocurrency tax several times in the past, most notably in late 2017 and early 2018, though none of those plans have come to fruition. However, in a highly controversial move last year, South Korean tax authorities levied $67 million in taxes on cryptocurrency exchange Bithumb due to transactions involving overseas customers.

However, the new tax plan may face more obstacles. The Daily Mail quoted an official from the Korea Regional Finance Institute as saying that individuals who want to evade taxes can do so by using over-the-counter (OTC) transactions.

Meanwhile, a blockchain industry executive said the government should hold off on implementing its tax plans until it develops a more efficient way to calculate taxes on cryptocurrency transactions, a process that could take “three to four years.”

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