The government of South Korea on Monday announced a plan to change the taxation system, according to which cryptocurrency exchanges will lose part of the current benefits. In particular, they are proposed to be excluded from the list of start-ups, along with small and medium-sized businesses.
According to the current tax legislation, start-ups and small and medium-sized enterprises can claim 50-100 percent reduction in rates of income or corporate tax during the first five years. Following the expiry of the five-year term, companies of this category may apply for a privilege in the amount of 5% to 30% of the rate.
It seems that the government considers such benefits as unjustified for cryptocurrency exchanges that are "ineffective in creating added value". The proposed changes will be submitted to Parliament until August 31. The last word on the question of whether to cancel the preferential treatment and from which date, still remains open for the parliament.
At the same time, the government specifies that the benefits for start-ups engaged in research and technology development are in place.
WHY IS IT IMPORTANT?
1) With the current legislation of South Korea, cryptocurrencies are not considered as financial assets. In this regard, the government is considering options for transferring the country's crypto exchanges to the control of the Financial Intelligence Unit (FIU). That will oblige them to follow the same AML / KYC standards as commercial banks.
2) The Financial Services Commission prepared a new initiative at the end of June, to fight money-laundering using cryptocurrency. Local banks that serve crypto exchanges are now required to monitor all accounts of this category of customers.