Bithumb Cryptocurrency Exchange Goes to Court Over $69M Tax Bill

Major South Korean cryptocurrency exchange Bithumb has decided to litigate a near $69 million tax bill levied by the National Tax Service.

According to a report published by The Korea Times on Jan. 16, Bithumb filed a complaint with the NTS, suggesting that the imposed tax bill is groundless given that cryptocurrency is not a legally recognized currency.

The South Korean tax tribunal now has to decide whether to grant or dismiss the exchange's motion within 90 days.

NTS imposed a retention tax - an income tax paid to the government by the payer of the income instead of its recipient - which is often withheld or deducted from income in most jurisdictions, according to The Korea Times.

The NTS has claimed that gains withdrawn from accounts held by foreigners are taxable income, and therefore it has a right to impose such a tax.

"Bitcoin under the current law is not an asset. It is clear and simple. The Ministry of Economy and Finance already made that clear. The NTS pushing ahead with the tax imposition is baseless and groundless, especially since it is still awaiting the ministry opinion on the same matter it sought again."

According to The Korea Times, Choi said that the current case with Bithumb could be a ploy by the NTS to establish grounds for taxing what were previously tax-free gains.

"In the case of a corporation's virtual currency transaction, all transactions that increase the entity's net assets are subject to taxation under the current law, so it is taxable, but it is practically impossible to produce tax revenue results by distinguishing only virtual currency transactions."

The nascent nature of digital assets has put many cryptocurrency investors at odds with tax regulators in their respective jurisdictions, as many agencies have failed to issue sufficient or any guidance regarding tax schemes for cryptocurrencies.

Failure to comply with these labyrinthine and murky tax policies can mean heavy fines for crypto investors.