Cryptocurrency exchanges in South Korea may soon lose eligibility for significant tax benefits currently granted to smaller companies.
A proposed revision to the existing tax law, announced by the South Korean government on Monday, would exclude crypto exchanges from the category of startups or small and medium enterprises (SMEs) that can claim a tax cut of up to 100 percent, according to CoinDesk Korea.
Under the existing tax law in the country, startups and SMEs are able to apply for a deduction of 50–100 percent of their income tax or corporate tax in the first five years after their establishment, and 5–30 percent thereafter.
However, the government appears to have decided that crypto platforms do not justify the tax perks, explaining that “cryptocurrency transaction brokerage is not effective in generating added value.”
A draft revised bill will be presented to the National Assembly by Aug. 31 for parliamentary debate before a decision will be made on whether and when the updated legislation should take effect.
That said, the government indicated that blockchain startups with relevant R&D focused on the technology will still be eligible for tax benefits – a move that is part of the government’s wider push for helping emerging technologies in the country.
The news marks the latest legislative effort in South Korea that takes a focus on cryptocurrency and tax. According to CoinDesk Korea, the government also announced in May that it would soon establish a cryptocurrency taxation system for investors.
Various other legislative efforts to address aspects of the crypto industry are currently in the works too, with a senior regulator recently urging haste over a bill aimed to govern exchanges.
Bitcoin and Korean won image via Shutterstock