Korea Tax Service Imposes Huge Withholding Tax on Bithumb

While the Korean government has not set up a taxational standard on cryptocurrency exchanges, the Korea Tax Service imposed a tax of 80 billion won on cryptocurrency exchange Bithumb.

Vidente, the largest shareholder of Bithumb Holdings Co., said in a public disclosure on Dec. 29 that it confirmed on Nov. 25 that the Korea Tax Service slapped a tax of 80.3 billion (about US$ 69 million) on Bithumb Korea, a subsidiary of Bithumb Holdings, in withholding tax on foreign customers' incomes.

"The matter is being handled by the Investigation Department of the Korea Tax Service and a local tax office," said an official of the Korea Tax Service. “We need to find out what taxation standards have been used and how the tax amount has been calculated.”

Some industry analysts noted that the Korea Tax Service may have established taxational grounds such as withholding taxes based on data obtained through special tax investigations into Bithumb and CoinOne conducted in January 2018.

In addition, many industry experts say that it is difficult to identify foreigners  based on their wallet addresses so the tax office is likely to have used the country codes of cell phones in identifying foreign customers.

However, Bithumb asserts that it is not proper for the Korea Tax Service to impose the withholding tax on the company as it pays the corporate tax and local income tax for its operating profit every year. Other cryptocurrency exchanges such as Upbit and CoinOne are on aleert over the unexpected hefty taxes from the government.