A revision to South Korean tax law may soon strip the country’s cryptocurrency exchanges of their ability to use significant tax breaks granted by the government to small businesses and startups.
Citing an announcement by the South Korean government, CoinDesk Korea reported that the proposed legal revision may result in excluding crypto exchanges from the category of startups or small and medium enterprises (SMEs), a status which entitles companies to tax cuts of up to 100 percent.
South Korean startups and SMEs are legally entitled to deduct from 50 to 100 percent of their income or corporate tax in the first five years after their establishment, and 5 to 30 percent thereafter. However, South Korean crypto exchanges have proven quite popular and generate billions of dollars in trade volume every day.
Two South Korean exchanges, Bithumb and Upbit, have consistently been placed in the top ten global cryptocurrency exchanges by trade volume on CoinMarketCap. The government appears to have decided that crypto exchanges make far too much money to qualify as startups or SMEs and that they should pay their fair share.
However, blockchain startups working on research and development could still be eligible for tax benefits under the revised provision.
A draft bill with the revision is set to be presented to the South Korean National Assembly, the country’s unicameral national legislature, by August 31 for parliamentary debate. Lawmakers are expected to then make a decision on implementing the legislation.
Initial coin offerings (ICOs) are currently banned in South Korea, but the nation’s top financial authority, the Financial Services Commission (FSN), as well as the National Assembly are considering lifting the ban in favor of regulation.