The largest cryptocurrency exchange in South Korea, Bithumb, has filed a complaint with the Tax Tribunal against the National Tax Service (NTS). The company wants the Tribunal to nullify a tax for nearly $70 million, which was previously imposed by the NTS on its customers.
Bithumb Fires Back
At the end of 2019, NTS imposed $69.3 million of withholding tax on the exchange’s foreign customers, according to a report. At the time, this was the first confirmed case where the Korean government has taxed cryptocurrency transactions.
The popular exchange noted that it will take legal actions against NTS’s decision, and it appears that they have done so. Earlier today, local news reported that Bithumb had filed a complaint with the Tax Tribunal. The company claims that it has already paid the necessary tax amount and that NTS’s request is “groundless.” A Bithumb official spoke on the matter:
“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.”
The withholding (retention) tax has to be paid to the government by the payer of the income, not the recipient. The Tribunal has to make its decision on the case in the next 90 days.
Cryptocurrencies Not Supposed To Be Taxed?
Bithumb’s defense also relies on the fact that digital assets are still not legally recognized currencies in Korea, and authorities should not impose a tax on them.
This is where the main contradiction comes from. The NTS considers that all gains withdrawn in Korean won from foreign customers must be taxed. However, experts on the matter also seem to support Bithumb’s argument that cryptocurrencies are not yet under the taxation laws. Choi Hwoa-in, an adviser to the Financial Supervisory Service purportedly talked about this:
“Bitcoin under the current law is not an asset. It is clear and simple. 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 also seems to believe that the NTS will try to implement further taxing regulations on crypto trading in the future. Also, she considers Bithumb’s current motion to dismiss the case as “calculated” and that the exchange might receive a partial or a full return of the amount it paid.