Bitcoin is so popular in South Korea that the government is planning to tax it

South Korea is preparing to tax the cryptocurrency after Bitcoin's trading volume surpassed that of the KOSDAQ. Han Seung-hee, commissioner of the National Tax Service (NTS), told lawmakers this week that they are discussing the best way to tax cryptocurrencies, including capital gains tax, value-added tax and gift tax.

South Korea plans to tax Bitcoin

Recently, South Korean law enforcement authorities held a National Tax Service hearing in Sejong City. NTS Commissioner Han Seung-hee responded to the taxation of cryptocurrencies, especially Bitcoin.

He was asked:

As the daily trading volume of virtual currencies gradually increases, even surpassing Kosdaq, we must actively respond to this phenomenon of shifting away from the traditional currency system. What is the tax collection plan of the National Tax Service?

Han replied:

Currently, only revenue is taxed, and we are still discussing whether to charge VAT or capital gains tax on virtual currencies such as Bitcoin.

Han said his department is currently discussing VAT and capital gains tax with the Ministry of Planning and Finance. In addition, he also mentioned that "the need for gift tax will be determined based on the final evaluation results." He said that the use of Bitcoin may lead to tax evasion (gift tax), so whether the act of giving cryptocurrencies as gifts to others should be taxed should be determined through specific valuation methods.

At the same time, he stressed:

We are monitoring the status of cryptocurrency trading and moving forward quickly with it.

Cryptocurrency Regulation in South Korea

During Saturday’s hearing, the legislature noted that Japan defines digital currencies as “general assets or services subject to consumption tax.”

The National Tax Agency of Japan explains:

In Japan, Bitcoin can be used to purchase goods, etc., and income generated from the use of Bitcoin will be subject to income tax.

Generally speaking, gains and losses (based on foreign exchange relativity) resulting from Bitcoin applications are classified as miscellaneous income, excluding situations where multiple income such as revenue is generated.

Han also mentioned that the United States taxes virtual currencies as assets, and the gains from their trading are subject to tax. He emphasized:

We should be as forward-thinking as the United States and Japan.

South Korea has been building a regulatory framework for digital currencies. In August, lawmaker Park Yong-jin submitted the Bitcoin Regulation Bill, but the government has not taken any action on the bill so far.

In early September, regulators began discussing how to deal with digital currencies. The measures they proposed included requiring cryptocurrency exchanges to conduct due diligence and implementing a stricter review process. In addition, the Ministry of Science and Technology and the Communications Commission announced that they would conduct on-site inspections of cryptocurrency service providers such as Bitcoin exchanges. Then, at the end of last month, the government announced a one-size-fits-all policy for all ICOs in South Korea.