The South Korean government has announced that it will implement a system to regulate and tax cryptocurrencies by July of this year following the country’s general elections taking place on June 13.
A ministry official said, “We do not have a specific time frame, but we are thinking about announcing a virtual money tax in the first half of the year.”
As reported by CCN, South Korea’s Ministry of Strategy and Finance will look at putting into place a “crypto adopters’ capital gains tax and other income taxes,” more specifically “levying a tax on profits generated by the sale of cryptocurrencies.”
According to the Ministry’s report on this proposal, “In order to tax the income accruing from a virtual currency transaction, it is necessary to amend the income tax law to add it [to the category of] taxable objects.”
South Korean officials studied the regulation of Bitcoin in various other jurisdictions to get a better understanding of what it needs to implement at a local level.
As concluded by South Korean government officials, “Currently, the US and the UK are taxed with capital gains tax, Japan with miscellaneous income, and Germany with other income. It is because the characteristics of virtual money were different in each country, such as payment means, monetary ability, financial assets, and so on. However, these countries have found that there are few cases where actual tax is imposed, as opposed to taxation based on the principle that there is a tax on income.”
The South Korean Ministry of Strategy and Finance plans on discussing this proposal with other G20 nations during a conference on virtual currencies it will host in Seoul on June 14-15.
The hope is that other G20 countries will embrace this proposal and follow South Korea’s lead in regulating Bitcoin and other digital currencies.
South Korea is currently the third most important virtual currency market in the world with studies suggesting that “at least 3 out of 10 workers have invested in cryptos an average amount of 5.6 million Yuan.”
Additionally, more than 80% of South Korean investors have made a profit, while just 6.4% have lost as a result of poor investments in virtual currencies.
Thailand Also Moves to Regulate Bitcoin
Neighboring Thailand has also proceeded with the regulation of virtual currencies in the country.
On March 27th, Apisak Tantivorawong, Thailand’s Minister of Finance, said the country is ready to set up a regulatory and tax framework for Bitcoin and its kind.
As reported by Coinspeaker, “the new laws on the cryptocurrencies and digital tokens cover all crypto trading and investing practices,” with levies set at “7% value added tax on all crypto trades and a 15% capital gains tax on the returns.”
According to the Nikkei Asian Review, this regulatory and tax framework developed by the Thai government has been put in place to “prevent the expanding [crypto] sector from being used for money laundering, tax evasion, and other criminal activities.”
However, Korn Chatikavanij, Chairman of the Thai Fintech Association, warns the Thai government that these regulations might lead Thai virtual currency startups to open up in other jurisdictions such as investor-friendly Singapore.
Chatikavanij told the Nikkei Asian Review that the military government has “to be cautious not to allow their conservative instincts to result in draconian regulations.”
Brazil’s Position on Bitcoin & Other Virtual Currencies
On the other hand, the President of Brazil’s Central Bank Ilan Goldfajn has reiterated that he doesn’t plan on regulating Bitcoin and other digital currencies in Brazil and will probably not support the aforementioned South Korean proposal during the upcoming G20 conference on virtual currencies.
In the past, Goldfajn has shown to be skeptical towards Bitcoin and its digital brethren, even referring to them as having similar characteristics to a “pyramid scheme.”
Overall, Goldfajn believes virtual currencies should be referred to as “crypto-assets.”
He said: “I don’t refer to them as money because money has to have stability in its value and be able to facilitate payments…I see them more as an asset, and a risk, because they don’t have the support of a central bank.”
What’s going on with the regulation and taxation of cryptocurrencies in your jurisdiction? Let us know in the comments’ section below!