The Seoul Administrative Court’s 2nd Division (Chief Judge Shin Myung-hee) recently issued a partial victory for the plaintiff, Bithumb Korea, a virtual asset exchange operator, in a lawsuit against the Yeoksam Tax Office for the cancellation of the miscellaneous income tax imposition and others. This decision overturns the taxation disposition during a period when the government’s taxation policy on virtual asset transactions was unclear, pointing out the lack of legal basis for the KRW 80.3 billion in miscellaneous income tax imposed on Bithumb by the National Tax Service (NTS) in 2019.
The NTS had classified approximately KRW 332.5 billion, withdrawn by Bithumb’s foreign members from 2015 to 2017, as miscellaneous income, imposing about KRW 73.1 billion in miscellaneous income tax and KRW 180 million in corporate tax. Bithumb contended that it merely mediates virtual asset transactions and is not obligated to make payments, arguing that there is no legal basis for taxing the aforementioned amount.
In response to the NTS’s tax imposition, Bithumb filed two appeals with the Tax Tribunal, which ultimately led to the NTS reducing the miscellaneous income tax to KRW 1.5 billion. However, Bithumb, unsatisfied, pursued legal action, and the court sided with Bithumb.
The court ruled that income not listed as taxable under the Income Tax Act is not subject to tax. It stated that it is difficult to categorize virtual assets traded on domestic exchanges as “domestic assets” or “assets located in Korea” without clear legal grounds. Consequently, the court declared that the imposition of miscellaneous income tax on the approximately KRW 332.5 billion, considered not domestic source income, is illegal and must be canceled. This ruling may pave the way for the cancellation of similar miscellaneous income tax impositions on other entities, such as the virtual asset exchanges Upbit and Coinone, which are currently involved in litigation.
