The South Korean government is looking to impose tax on capital gains resulting from virtual currencies transactions. This new tax is targeting profits arising from the trade of digital currencies such as Bitcoin and other cryptocurrencies according to government sources.
The Korean Ministry of Economy and Finance confirmed these news stating that it is pushing for new measures to raise revenue from this relatively new asset class. According to a ministry official, the new tax regulations could be in place as early next year as they have been working on the laws for quite some time.
Related discussions have been taking place. The revised bill will be drawn up by the first half of next year.
Initial steps have been made with a related bill already tabled in the National Assembly and moves made to ensure it passes. The bill seeks to improve transparency in trading of virtual assets and is currently awaiting passage at the sub-committee level. If the bill passes the parliament’s plenary session it is set to go into effect one year after its promulgation.
Notwithstanding, the South Korean government is keen to put in place the capital gains tax on virtual currencies regardless of the bill’s passage. But, for this to be successful the government will need to tackle a number of issues. Firstly, the policymakers need to make clear distinction of what qualifies as a virtual asset. Secondly, the government will be required to determine whether gains from trading of virtual assets will be considered in the same manner as those gains arising from trading stocks or real estate.
Other modalities also need to be set out in the bill as the government will rely on private and decentralised exchanges to obtain trading records. In this case appropriate provisions will be required to provide guidance to virtual currency exchange operators. They will be required to identify the traders and keep a separate records of South Korean nationals for the capital gains tax purposes. This will be necessary to alleviate further complications as cryptocurrency prices usually differ across multiple exchanges. Which is unlike the standard prices for stocks.