South Korea’s Increased Efforts In Combating Crypto Tax Evaders

South Korea’s national tax enforcement agency (the NTS) intensifies efforts in clamping down on those who hide their income with digital assets to avoid paying tax. 

A Helping Hand

A recent report by a local news outlet (the Korea Herald) revealed that the NTS had uncovered the identities of 2,450 tax evaders using digital assets to hide the true worth of their income earnings. The agency further estimated that the total amount of tax earnings accrued to the government through the agency to be more than $33B (about 37B WON).

After a thorough investigation of the culprits involved in evading taxes through crypto, the agency alleged that a popular South Korea-based crypto exchange (the Hashed) is helping these individuals avoid tax.

Hashed Under Scrutiny

Per an official announcement, the tax office in Seoul will lead the investigation against Hashed. But the statement didn’t give details about the investigation. But one of the tax office’s top-level officers revealed that “‘slush’ fundraising or tax evasion by a firm’s CEO is one primary reason for setting a special committee to investigate a small business’ involvement in tax evasion.”

The sub-committee tasked with this responsibility has already been inaugurated early last month and is expected to give a comprehensive report of its investigation by February next year. Interestingly, this announcement comes a few days after Hashed’s venture fund ii investment raised more than $200m in a fundraising event. Hashed raised over $120m from its venture fund in a fundraising event conducted late last year.

However, Hashed intends to use the $200m fundraised to develop and expand its web 3.0 product offerings. The crypto platform already has a vested interest in more than 75 firms. However, most of those investments are in crypto-related projects, especially DeFi networks (e.g., MakerDAO) and NFT projects (such as Axie Infinity).

A New Amendment  

It is important to realize that the Asian nation’s legislature agreed to postpone the implementation of the crypto tax law by 12 months. Hence, if the parliament approves the crypto tax policy, it would only take effect at the start of 2023 and not 2022. The main highlight of the crypto tax policy is that any trader making gains of more than $2.2K from trading the digital asset market is expected to pay 20% of such earnings as tax (as stipulated by law).

Regardless, the nation’s tax enforcement agency is leaving no stone unturned in ensuring that every eligible citizen pays their taxes and as at when due. Even famous icons such as the BTS band involved in NFTs are excluded from paying taxes on their NFT earnings. Their NFT acquisitions a few months ago fueled the discussion that South Korea’s crypto tax policy is incomplete without including how NFT earners should be taxed.

Aside from enforcing tax payments, South Korea’s financial regulators are also making intensive efforts to stop those using the public’s lack of adequate knowledge about the crypto world to scam them. Two months ago, over 38 persons involved in a kimchi premium investment scheme were arrested for scamming ‘investors.’

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