South Korean cryptocurrency exchanges, which turn out a fee profit of billions of won every day thanks to the digital currency frenzy, will need to pay up to 24.2 percent taxes. Accordingly, large exchanges, which earn billions of won a day from fees such as Upbit, Bithumb and Coinone, will be charged with an astronomical amount of taxes.
According to the Ministry of Strategy and Finance on January 22, the government will be collecting a 22 percent corporate tax and a 2.2 percent local income tax from the country’s cryptocurrency exchanges, applying the tax rates before the Moon Jae-in administration.
Major crypto exchanges will have to pay an astronomical amount of taxes. The securities industry estimated that Bithumb, one the largest exchanges in the nation, earned more than 310 billion won (US$289.31 million) from commission last year, based on monthly transactions and commission rates.
According to the data of financial due diligence released by Bithumb, Bithumb posted 49.27 billion won (US$45.98 million) in sales by July last year and 49.23 billion won (US$45.94 million) came from commissions. In short, most of its sales are a fee income. Applying a 79.3 percent of net income by July to the total sales ratio last year, Bithumb is expected to record over 250 billion won (US$233.32 million) of net profit last year. Accordingly, the exchange is forecast to pay about 60 billion won (US$56 million) in taxes, according to the tax percentages announced on January 22.
Although other exchanges haven’t revealed their accurate sales or net profits, Upbit, Coinone, Korbit and Coinnest are making huge profits due to the frenzy of cryptocurrency speculation. When combining all their profits, the taxes to be collected will grow further.
Upbit, which began its official service from October last year, has a daily trading volume of 7 trillion won (US$6.53 billion) and a daily average commission of 3.55 billion won (US$3.31 million), exceeding those of Bithumb. The daily average transactions of Coinone, Korbit and Coinnest reach over 200 billion to 600 billion won (US$186.65 million to 559.96 million), which are among the highest in the world.
The rate of taxation on cryptocurrency exchanges is mostly likely to increase further. As the revised corporate tax law passed last year, the maximum tax rate for large companies with an annual income of more than 300 billion won (US$279.98 million) has increased 3 percent points from 22 percent to 25 percent.