02/08/22

SOUTH KOREA: Tax agency to scrutinize tax evasion via virtual assets.

As published on koreaherald.com, Tuesday 2 August, 2022.

The nation’s tax agency has pledged to take stern actions against tax evasion practices via virtual assets, including cryptocurrency, and online platforms.

The National Tax Service, in its policy briefing before the strategy and finance committee of the National Assembly on Monday, clarified that the kind of new tax evasion is hampering justice in the market as well as fairness in taxation.

More and more people are reportedly seeking to dodge taxes by investing in virtual assets after relocating their wealth to tax havens, including some countries in the Caribbean Sea or Southeast Asia, an official said.

Though Korea’s tax authority has yet to levy taxes on gains on trading of cryptocurrencies, the sort of virtual assets have been in active use for money-laundering, he said.

According to cases cited by the NTS, an individual who owns a hospital in Seoul owed the state 2.7 billion won ($2 million) in income tax.

The hospital owner, who had been residing in an apartment in southern Seoul’s Gangnam district, argued that he was not earning any income. But the NTS uncovered that he had injected 3.9 billion won into a cryptocurrency.

The evader was eventually ordered to pay the tax after the NTS confiscated his virtual currency account.

Another individual sought to evade a capital gains tax worth 1.2 billion won after enjoying gains of 4.8 billion won via trading a property in Gyeonggi Province. He was found to have invested all of his gains into a cryptocurrency.

Officials said that cryptocurrency has also been used to evade inheritance and gift taxes.

They said that online platform operators are also one of the core targets of the tax agency.

More operators are seeking to relocate the platform servers for electronic commerce activities overseas involving tax havens in an apparent bid to dodge income taxes.

In a report to the National Assembly, the tax agency also signaled a full-fledged inquiry into businesses, which are allegedly fanning the inflation through their dubious supply of raw materials.

To weed out price fixing, cartels or any possible tax dodging among importers and local providers of raw materials, the NTS is closely coordinating with the Fair Trade Commission.

In addition, the agency said it would look into some allegations of illegitimate intragroup trading among affiliates in the conglomerate sector.