The Korea Blockchain Association has called for the government’s new 20% crypto trading tax plan to be delayed for another two years.
According to an Oct. 14 report from News1 Korea, the Korea Blockchain Association, or KBA, is requesting regulators postpone the South Korean government’s implementation of its long awaited new tax strategy until Jan. 1, 2023.
The KBA doesn’t explicitly state it is against the 20% tax rate but said that crypto exchanges and companies in the industry need a “reasonable period” to prepare for the Income Tax Act.
One of KBA’s reasons for the delay is due to a short window between regulations applying to the old tax scheme and the start of the new one. Crypto exchanges would be allowed to report on trades falling under the previous tax code until the end of September 2021. But the KBA is arguing that since Korea’s Ministry of Economy and Finance set the revised code to be enforced starting on Oct. 1, 2021, it would be difficult to comply with the new regulations in potentially less than 24 hours.
Korea Blockchain Association chairman Oh Gap-soo implied that as this was the first time the government had gotten involved in taxing digital assets, a temporary suspension of the tax code might be necessary. Regulators might not immediately accept reports from crypto firms, leading to uncertainty as to whether they can continue to operate in October.
“The industry is having a great deal of difficulty in preparing for taxation because it is not equipped with a tax infrastructure in a situation where it is uncertain whether or not the business will continue ahead of the enforcement of the Special Payment Law.”
He added that: “It is necessary to provide a reasonable minimum period of preparation so that it can contribute to the national economy and to secure tax revenue in the long term.”
Under the new tax plan, gains made from virtual currencies and intangible assets will be classified as taxable income, calculated annually. Income from virtual assets below $2,000 per year falls below the minimum threshold and will not be taxed. Any income generated from cryptocurrency trading above this threshold, however, will be taxed at a set rate of 20%.
Modifications to existing tax law are likely to impact many businesses across the country. Recently, four of the five top banks in Korea announced they would be introducing “crypto-asset services.” In addition, at least one exchange is partnering with a major bank for fiat to crypto trading.
“The industry is in line with the principle to tax income from virtual assets and will actively cooperate,” a representative for the KBA stated.