South Korea boasts a friendly atmosphere for cryptocurrency usage. Yet, the Asian country seeks to regulate the industry albeit in a mild manner, unlike China. However, South Korea has suspended the operation of existing tax regulations owing to the disagreements between the opposition parties and the ruling party.
According to reports, South Korean commissioners are still deliberating on the appropriate classification for cryptocurrencies. Thus, some proposed amendments seek to shift the date of operation of existing tax regulations to January 1, 2023. Members of the ruling party have disagreed with the position of the Deputy Prime and minister of strategy and finance, Hong Nam-ki who noted during a plenary session at the National Assembly that authorities will begin taxing virtual assets from next year.
Democratic Party Representative Pushes for Taxation Law Postponement
One of the representatives of the Democratic party, Rep. Roh Ung-rae stated that he sought a partial amendment to the Income Tax Act which would help in putting off taxation of virtual assets within the country until next year. The proposed amendments also clamor for an increment in the tax deductions by categorizing virtual asset income as financial investment income rather than under ‘Other Income.’
Additionally, Rep. Roh argued that the postponement of the taxation laws is a matter to be determined by legislation. As such, no permission or consent is required from the Ministry of Finance. The representative argued that allowing the ministry to decide on the issue would not only undermine public trust in the government but will pave the way for the evasion of taxes. Rep. Roh stated that he will push for the amendment bill to be effected by next month, which is the next legislative session of the National Assembly.
Ministry of Finance Imposes 20% Tax on Crypto Income
Earlier, South Korea’s ministry of finance had passed the Income Tax in which it categorized virtual assets under Other Income and imposed a 20% tax on income above 2.5 million won generated from cryptocurrencies. The latter was to come into operation by next year. However, it seems that would not be possible due to the postponement clamored for by Rep. Roh.
Supporting his motion, Rep. Roh argued that pushing for an operation of the law by next year is ignoring reality as the infrastructure to monitor certain transactions for taxing is not available. He noted that it will be difficult to supervise transactions between foreign crypto exchanges or peer-to-peer transactions, thereby creating a ‘tax blind spot.’ Hence, the need for a deferral. It is an inevitable situation, Rep. Roh added.
Apart from Rep. Roh’s deferral motion, there are several other motions pushing for deferral. Rep. Roh also stated that active efforts will be made to ensure the National Assembly passes these motions. Although Roh admitted that there is likely to be disagreement between the ruling party and opposition parties which will delay the Amendment bill, he added that any issue will be quickly resolved.
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