South Korean tax authorities have promised to take tough action against tax evasion through virtual assets and platforms. Although the South Korean government has yet to begin taxing capital gains arising from crypto investments and transactions, authorities in Seoul claim that cryptocurrencies are being actively used for money laundering.
South Korean citizens are accused of investing in crypto assets to dodge taxes
South Korea’s National Tax Service (NTS) intends to take tough action against tax evasion practices that rely on virtual assets such as cryptocurrencies and the platforms that operate with them, the Korea Herald quoted a representative from the agency as telling readers.
The number of South Koreans trying to evade taxes by investing in crypto assets after transferring their wealth to tax havens such as the Caribbean Basin and some Southeast Asian countries is reportedly increasing, officials said Monday.
In a policy briefing by officials before the National Assembly Committee on Strategy and Finance, South Korea’s National Assembly, officials elaborated that this type of new tax evasion hinders not only tax fairness but also market justice.
The NTS has not yet implemented a tax on profits from cryptocurrency transactions, but these assets are actively used for money laundering, he stressed. The officer cited various examples of such activity on the part of taxpayers. One of these involved the owner of a hospital in Seoul, which owed 2.7 billion won ($2 million) in income taxes.
The man, who resided in the Gangnam area of the South Korean capital, claimed that he earned nothing. However, the tax office was able to establish that he had put 3.9 billion won (about $3 million) into cryptocurrency, and after the NTS seized his crypto account, he was forced to fulfill his obligations to the state. Crypto was also allegedly used to evade inheritance and gift taxes.
NTS officials also admit that online platform operators are the agency’s primary targets. The claim is that more and more of them are trying to move their e-commerce servers overseas to avoid taxation, including in tax havens.
South Korean authorities recently delayed again a 20% tax on crypto-related profits until 2025. The tax was scheduled to take effect next January on capital gains over 2.5 million won ($1,900). The government postponed the tax for a second time because the original plan was to implement it in January 2022.
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