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South Korea’s National Tax Service (NTS) has announced that it will withhold tax from cryptocurrency exchange Bithumb’s foreign customers, Korea JoongAng Daily reported.
This marks the first instance of the government imposing a tax on crypto transactions. A notice uploaded by the exchange’s largest shareholder Vident on the Financial Supervisory Service’s data system states that the NTS will impose “80.3 billion won [$69.3 million] of withholding tax on our [Bithumb’s] foreign clients.”
“Bithumb Korea is planning to take legal action against the tax claim so the final payment can be adjusted in the future,” it added.
Withholding tax, Korea JoongAng Daily explained, is paid by the party that makes payment in a transaction, not the recipient.
The NTS categorized crypto-trading earnings of foreign customers as “miscellaneous income,” which refers to irregular income such as rewards or lottery gains. The agency calculated the 80.3 billion won amount based on the amount withdrawn by foreign clients. The withholding tax rate for miscellaneous income is 22 percent.
An anonymous source at the exchange told the news outlet that even after the government banned minors and foreigners from opening crypto exchange accounts and trading cryptocurrency in December 2017, foreigners still used domestic exchanges.
“So were transactions using fake names. Even for the exchanges, it’s difficult to know who the investors actually are and how much their trading profits are. It’s questionable what the taxation was based on,” the source added.
Earlier this month, reports suggested that the country was going to introduce crypto tax regulations in 2020. The Ministry of Economy and Finance is working on a bill to tax capital gains from cryptocurrency transactions.
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