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| Bithumb headquarters in Seoul |
Korea's leading cryptocurrency exchange Bithumb filed a complaint with the Tax Tribunal against the National Tax Service (NTS) over what it considers a "groundless" tax the agency imposed on its customers, the company said Friday.
The firm claims that the cryptocurrency is not a legally recognized currency and therefore lacks the authorities lack the grounds to impose a tax of any kind.
The Tax Tribunal will have 90 days to determine whether to grant or dismiss Bithumb's motion seeking to nullify the 80.3 billion won ($69.1 million) in withholding tax the NTS imposed last November.
A withholding tax, also known as a retention tax, is an income tax paid to the government by the payer of the income rather than by its recipient.
Mostly applied to employment income, the tax is withheld or deducted from the income in most jurisdictions.
This means Bithumb has to pay the imposed amount to the NTS first before paying the remaining income to its customers.
"We paid the full amount and have since been preparing for arguments. We believe we will be given a chance to clarify our stance in court," a Bithumb official said.
The NTS claims gains withdrawn in Korean won from accounts held by foreigners are taxable income.
This is refuted by experts who view the cryptocurrencies are not recognized as anything tangible much less as an asset.
"Bitcoin under the current law is not an asset. It is clear and simple," Choi Hwoa-in, an adviser to Financial Supervisory Service said.
"The Ministry of Economy and Finance already made that clear. The NTS pushing ahead with the tax imposition is baseless and groundless, especially since it is still awaiting the ministry opinion on the same matter it sought again," she said.
The blockchain expert aroused suspicion that the NTS is putting the issue front and center for public discourse in a clever move seeking to establish grounds to impose tax on what essentially remains tax-free gains.
An increasing number of people made a lot of money via crypto trading over the past few years, which she said was enough for the tax authorities to view the trading and subsequent gains new source of taxable income.
"Bithumb filing a suit after paying the full amount in that sense is a calculated move expecting partial to full return of the amount paid," she said.
The dispute coincides with ongoing efforts to impose tax on the new form of digital currency, which has long been criticized for its use as a means of speculation among seekers of short-term windfall gains.
It also came amid growing public outcry demanding fair taxation based on the principle that "where there is an income there should be a tax."
"We cannot comment on the ongoing matter. We will await the judgment from the Tax Tribunal," an NTS official said.
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