South Korea Preparing Tax System to Avoid Cryptocurrency Tax Evasion
The National Tax Service in South Korea is preparing to launch a virtual asset tax system to help analyze the information received from cryptocurrency holders to avoid cryptocurrency tax evasion. Local sources reported that the agency had contracted the services of a third-party company to help in this task, and it is scheduled to be launched next year.
South Korea Developing Cryptocurrency-Focused Tax Platform
The growth of bitcoin and other cryptocurrencies as investment vehicles is getting the attention of tax enforcers. The National Tax Service of South Korea is preparing to implement a virtual asset tax system that will receive the data from cryptocurrency holders and process it to have a gross panorama of the taxes they need to pay.
According to local media, GTIC, a consulting firm, has been selected to lead the development and implementation of this system, and it has begun a consulting project on the subject for the next four months.
After several revisions to the local regulatory framework, virtual assets service providers (VASPs) must report customers’ transaction data to the National Tax Service. Nonetheless, the service has no automated way of analyzing and managing this information.
Now, with the application of the aforementioned system, the service hopes to curb cryptocurrency tax evasion and apply fair crypto taxing rules, helping to detect illegal transactions, money laundering, and irregular inheritance gifting.
The service has ordered the development of the system, and it is slated to be launched by 2025. South Korea has also started to strengthen the regulation on VASPs, as the South Korean Financial Intelligence Unit (FIU) announced in February that it would expel the cryptocurrency exchanges that fail to meet its enhanced requirements.
The People Power Party, which holds the country’s presidency, announced plans to defer cryptocurrency taxation until at least 2027, dedicating more time to establishing a minimal system for cryptocurrency taxes. Nonetheless, reports indicate these were quickly abandoned, as the parties turned to election-focused tasks.
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