The Korea Tax Service has imposed a withholding tax of 80 billion won (over $68.9 million) on the country’s crypto exchange Bithumb.
Reported by multiple local news agencies, the withholding tax was imposed because the tax agency has no clear assessment standard for crypto businesses.
The news was brought into the public sphere on Saturday by Vidente, the largest shareholder of the South Korean digital currency exchange. The company found out about the massive pending tax amount around a week after its acquisition of a 34.24 percent stake from the crypto exchange from Bithumb Holdings, the parent company of the exchange.
How was the amount obtained?
The move by the tax authorities has attracted criticism from within the crypto industry as there are no guidelines to assess the books of exchanges. In addition, the lack of any foreign corporation without a permanent establishment in the country for the crypto industry also created confusion about how the massive amount was calculated.
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“The matter is being handled by the Investigation Department of the Korea Tax Service and a local tax office,” an unnamed official from the tax agency told Business Korea. “We need to find out what taxation standards have been used and how the tax amount has been calculated.”
According to some analysts, the tax authority might have established taxation grounds based on the massive amount of data collected through tax investigations on two exchanges – Bithumb and CoinOne – in January this year. Besides, per industry experts, foreign addresses were identified using the country code of the linked phone number used to open the accounts.
Although it is not confirmed, the crypto exchange is likely to challenge the order of the tax agency in court.
Meanwhile, the crypto exchange is also working on its native blockchain and launched a digital currency last month.