The South Korean Tax Administration has vowed to crack down on tax evasion through virtual assets and platforms. While the Korean government has yet to start taxing capital gains from investing and trading in cryptocurrencies, the authorities in Seoul claim that cryptocurrencies have been actively used for money laundering.
Koreans accused of investing in crypto assets to avoid taxes
National Tax Service (NTSSouth Korea intends to crack down on tax evasion practices that rely on virtual assets, such as cryptocurrencies, and the platforms it works with, the Korea Herald told its readers, citing a representative of the agency.
A growing number of Koreans are seeking to evade taxes by investing in crypto assets after transferring their fortunes to tax havens such as some countries in the Caribbean Basin and Southeast Asia, the official said Monday.
During the authority’s policy briefing before the National Assembly’s Strategy and Finance Committee, the Korean parliament, the official explained that this kind of new tax evasion impedes fairness in the market as well as fairness in taxes.
He emphasized that although the NTS has yet to apply taxes on earnings from cryptocurrency trading, these assets have been actively used for money laundering. The official pointed out various cases involving such behavior on the part of taxpayers. In one, a hospital owner in Seoul owed 2.7 billion won ($2 million) in income tax.
The man, who was staying in the Gangnam district of the Korean capital, insisted that he earns nothing. However, the tax department was able to establish that he had invested 3.9 billion won (nearly $3 million) in the cryptocurrency. He was forced to fulfill his obligations to the state after his crypto account was seized by NTS. Cryptocurrencies are allegedly used to evade inheritance and gift taxes as well.
NTS officials have also acknowledged that operators of online platforms are a prime target of the agency. The claim is that an increasing number of them are seeking to move their e-commerce servers abroad, to avoid taxes, including to tax havens.
South Korean authorities recently postponed a 20% tax on cryptocurrency-related gains until 2025. The tax was supposed to take effect in January, next year, for capital gains in excess of 2.5 million won ($1900). The government has postponed the imposition of the tax for a second time as the original plan was to introduce it in January 2022.
What do you think of the intentions of the South Korean Tax Service regarding cryptocurrency investments? Tell us in the comments section below.
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