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Overseas crypto exchange users face tighter scrutiny on tax
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By Lee Kyung-min
By Lee Kyung-min
Overseas cryptocurrency exchange users who fail to report overseas account balances over 500 million won ($441,000) will be fined up to 20 percent of the unreported amount, according to the national Tax Service (NTS), Tuesday.
Under the new rule, those who have over 500 million won worth of digital coins in accounts overseas at the end of any month throughout the year, will be obliged to report details to the tax agency by June of the following year.
Any underreporting will be met with the 20 percent fine; and if the unreported amount exceeds 5 billion won, accountholders can be referred to the prosecution and have their identity disclosed.
The measures announced by the NTS seek to better identify cryptocurrencies that are no longer untaxable following a revision to a related law that recognizes digital currencies as a financial asset. Previously, cryptocurrencies were not recognized as an asset and thus it was harder for government ministries to undertake seizure measures as they are allowed to do with other assets involved in criminal cases.
A reward of up to 2 billion won will be given to those who play a key role in identifying attempted tax evasion utilizing digital currencies, the NTS said.
The steps reflect criticism that users of overseas crypto exchanges unlike those using local ones were not subject to seizure orders by the tax authority here.
“Holders of virtual assets traded on overseas exchanges are difficult for the Korean government to identify due to limits in accessing user information preserved by countries the exchanges are based in. We will come up with further measures to crack down on attempts seeking to exploit loopholes in the system,” an NTS official said.
The move comes as digital coins are increasingly emerging as a safe asset, a highly viable alternative to other financial products.
According to local cryptocurrency exchange Upbit, its market index rose to over 9,742 points, Monday, almost 10 times its 1,000 points about three years ago.
The index encompasses all cryptocurrencies traded in the local market, pegged to changes in market capitalization.
According to another cryptocurrency exchange Bithumb, one bitcoin traded for 66.8 million won Monday after exceeding 70 million won for the first time Sunday.
Bitcoin's price had stayed below 20 million won for the past three years, but spiked around the end of 2020 and is on a steep rise.
Meanwhile, dozens out about 100 small crypto exchanges are expected to close their businesses, as the exchange operators will need to meet strengthened requirements, or face a prison term of up to five years or a fine of up to 50 million won.
This follows a revision to a related law whereby operating licenses will only be granted to those that have money laundering prevention measures in place among other criteria to be met.