[KwonInwook] No taxation until 2021?.... 'Taxation will be applied'

[KwonInwook] Many people think taxation of virtual assets will not be applied until Oct. 2021. However, that only applies to individual investment incomes, which means that all other virtual assets are the subject to the taxation. It’s because taxation focuses on how people earn money, not how they would receive the earnings. #Distinguish between the tax on investment and the others The mining of the virtual asset is an example. If an individual purchases a building and sells it at higher price, they must pay capital gains tax. But if an individual sells a building that he constructs by hiring workers, he is entitled to pay comprehensive income tax as his act is considered to be a “construction” company as well as a type of investment. Applying this logic to virtual asset, mining of virtual asset is an act of investment as people try to mine and acquire assets, not purchasing it. As a result, the earnings will be considered to a type of business income and people must report and pay comprehensive income tax. Virtual asset investors can acquire assets in many different ways, including investment, gifts, mining, and participating in events or competitions. Korea’s laws even speculate that people who acquire virtual assets, excluding by investing, have a duty to pay taxes. In other words, they will anyway have to pay taxes on their virtual assets when their acts are caught by taxation authorities. However, it is not easy for taxation authorities to discover the details of individual's virtual asset investment. Although they discover some transactions, it takes a considerable amount of time to fully understand the transaction and calculate specific amount of tax and finally impose it on investors. #Three reasons why taxation of virtual assets are not properly working Many virtual assets investors are not actually paying taxes. There are three reasons. First of all, taxation authorities cannot know the details of virtual transactions. It's because virtual assets service providers are not obliged to report details of their transactions to the authority at least until Sept. 30, 2021. So investors are not really responsible for voluntarily reporting the transactions and pay taxes. Secondly, no one has a full expertise to consult the virtual assets taxation yet. Neither tax accounts nor lawyers fully understand the process of taxation of virtual assets. If an expert wants to apply taxation on virtual assets, he or she must understand the concept perfectly. However, there are so many terms need to be understand to comprehend all vocabularies and concepts of virtual assets. As a result, no experts can consult about taxation on virtual assets unless they are specialized in the field or actually have experienced the process. Lastly, many investors share an idea that virtual assets have no taxes. It is a misunderstanding. It is right that no taxation will be applied to the investment income that came from virtual asset until Oct. 2021. It doesn't mean that all earnings from virtual assets are free from taxation. Almost all online communities and media only focuses on the area in which investors don’t have to pay taxes. So many virtual asset investors have no idea about their obligations of paying taxes. Not all investors are not paying taxes; some are actually paying it. When investors make transactions through large-sized providers, external auditors regularly check their taxation processes. As those transactions are easily exposed to local tax offices, investors usually report it in advance and pay taxes. Kwon In-wook, an IW tax office accountant

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