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Residents in South Korea may soon have to pay a 20% tax and an extra 2% local tax on their digital currency profits.
Deputy Prime Minister Hong Nam-ki announced that the government has finalized its digital currency tax proposal. The proposal will be voted on September 3, 2020 and is expected to take effect on October 1, 2021—if passed.
How it works
The proposal states that only digital currency profits above KRW2.5 million, or $2,089 at press time, will be taxed. This means that if a digital currency trader’s total profits are KRW4 million, only KRW1.5 million will be taxed since any amount up to KRW2.5 million is tax-exempt.
However, some think the Korean government’s taxation of digital currency comes too soon.
Sung Tae-yoon, an economist at Yonsei University, told the Korea Times that when it comes to digital currency taxation,
“It is premature for the government to impose cryptocurrency taxes at a time when the market has not developed enough in a stable manner…The financial authorities should think twice before imposing taxes on the market, as the digital currency industry is still in its infancy. Any rash taxation or introduction of regulations can be a stumbling block for sustainable growth of the industry”
Some, like Sung, believe the digital currency market has not matured yet, and that implementing tax too soon could stifle the growth of the blockchain and digital currency industry in South Korea.
Why tax now?
South Korea may be looking to tax digital currency profits given the economic impact that COVID-19 has had on the country. The government may be looking to create new revenue streams by taxing activities that currently aren’t taxed—like digital currency trading—to recoup some of the economic loss that they have suffered as a result of the global pandemic.