South Korea's National Tax Service withholding $70m worth of Bithumb tax

According to a recent report from South Korea, the country’s National Tax Service (NTS) plans to withhold 80.3 billion won ($70 million) worth of taxes from Bithumb. The decision was confirmed by Bithumb’s largest shareholder, Vidente, with further claims that the tax will be imposed on the exchange’s foreign clients.

The move is also important due to the fact that it is the first case where South Korea’s taxation agency had imposed a tax on gains made from digital currency transactions.

Meanwhile, as reported by Korea JoongAng Daily, Bithumb is planning to take legal action against these tax claims. The report also claims that the amount was calculated according to the rate for miscellaneous income and that it will likely be paid by the exchange itself. The tax will also be collected at an annual rate of 22%, based on the number of foreign withdrawals.

For now, it remains unclear what might be the consequences on the exchange’s clients, and Bithumb itself has yet to release an official comment regarding the situation. However, a source familiar with the situation claims that foreigners somehow managed to bypass the country’s ban on opening accounts on Bithumb.

In other words, there were numerous transactions made by using fake names, and the source claims that even the exchange itself finds it difficult to discover which investors are foreigners and what their profits from trading might be. With that in mind, it remains questionable how the taxing agency came up with the amount they announced.

Meanwhile, the country’s Income Tax Axt does not recognize crypto transactions as taxable events at the moment. It also lacks rules regarding crypto taxes, although the country’s Ministry of Economy and finance did promise that it will introduce taxation regulations in 2020. Furthermore, Korea’s central bank plans to hire experts that would study DLT, crypto, and CBDCs.