South Korea’s leading cryptocurrency exchange Bithumb has just filed a complaint against the National Tax Service (NTS) regarding the recent groundless tax fee of around $69 million the agency imposed last November.
According to local news, the exchange has filed a complaint with the Tax Tribunal, claiming the tax fee, imposed in November 2019, to be groundless as digital currencies are not legally recognized as currencies and therefore the agency lacks the authority to impose a tax on any kind on their assets.
The article quoted an anonymous Bithumb official, who commented on the issue:
“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.”
Concurrently, the agency stated it had imposed a withholding tax of over $69 million on Bithumb’s foreign customers’ income last November. Mostly applied to employment income, 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.
The agency then claimed that gains withdrawn in Korean won from accounts held by foreigners are taxable income. In other words, the NTS classified the exchange’s cryptocurrency trading of foreigners as miscellaneous income, recognizing capital gains as assets.
Choi Hwoa-in, an adviser to Korea’s financial regulator, the Financial Supervisory Service, refuted this by arguing that cryptocurrencies are not considered an asset under the current law of the country, and therefore, it is not taxable.
“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.”
Furthermore, Choi noted that the exchange „filing a suit after paying the full amount in that sense is a calculated move expecting partial to full return of the amount paid.“
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.
An anonymous NTS official told The Korea Times that as the matter is ongoing, they cannot comment.
Meanwhile, 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 follows the growing public protests that demand fair taxation based on the principle that “where there is an income there should be a tax.”