TAX IMPOSED ON CRYPTOCURRENCY EXCHANGE

[Anchor Lead]

The National Tax Service has imposed more than 80 billion won in withholding tax on Bithumb, Korea's largest cryptocurrency exchange. The tax should have been levied on the personal incomes of Bithumb's foreign clients. This is the first time that individual income from digital currency trading has been taxed, sparking debates on whether cryptocurrency transactions can be taxed.

[Pkg]

Bithumb is Korea's leading cryptocurrency exchange. Vident, Bithumb Holdings' largest shareholder, notified that "80.3 billion won in withholding tax has been imposed on Bithumb for the incomes of its foreign clients." Korea's National Tax Service explained that the money gained by foreign clients on the exchange is regarded as income and levied a 20 percent tax on Bithumb as the cryptocurrency exchange is obligated to withhold tax from its clients. Authorities had levied corporation gains tax on cryptocurrency exchanges many times before, but this is the first time that tax was levied on personal income. However, domestic clients were exempted from the latest taxation as they don't have to pay withholding tax to Bithumb. Bithumb said it will pay the tax first and then take legal action to counter the ruling. However, it is practically impossible for Bithumb to collect back taxes from its foreign clients as tax amounts on their past transactions had not been calculated. Moreover, it is hard to track their identities now.

[Soundbite] PROF. KIM WOO-CHUL(UNIV. OF SEOUL) : "Tax authorities' measure has lots of problems, such as whether Bithumb was notified beforehand that the transactions were taxable."

Debates have raged on as to whether cryptocurrency transactions can be taxed or whether there were any grounds for taxation. The finance ministry recently announced it plans to establish grounds for taxation when relevant laws are revised next year. Given the tax agency's latest ruling, other cryptocurrency exchanges are likely to be hit with tax in the future. However, the NTS hasn't made it clear whether domestic clients will also be taxed for past crypto transactions.