In an effort to bolster tax compliance and oversight within the burgeoning virtual asset market, South Korea has announced plans to introduce a tracking system. The National Tax Service (NTS) of South Korea has selected GTIC, a consulting firm, to spearhead the development of this innovative system. Named the virtual asset integrated management system, it aims to analyze and manage transaction data associated with digital currencies.
The selection of GTIC occurred at the end of February, setting the stage for a consulting project slated to span approximately four months. This development is part of a broader initiative to address the challenges posed by the increasing investment in virtual assets, especially following the United States’ approval of Bitcoin Spot ETF trading. The surge in Bitcoin’s value, which recently exceeded $70,000, underscores the urgent need for enhanced regulatory mechanisms.
Enhancing tax compliance and oversight
The proposed tracking system is a response to the significant growth in virtual asset investments, which has caught the attention of regulatory authorities worldwide. By leveraging compulsory reporting of virtual asset transactions, the system will play a crucial role in curbing tax evasion and promoting fair taxation practices. Following the consulting phase plans to construct the system are underway, with an anticipated launch by 2025.
Amendments to the Corporate Tax Act and the Income Tax Act have already mandated virtual asset businesses to report transaction details. However, the absence of a sophisticated analytical system has presented challenges in ensuring tax compliance. The new system is expected to fill this gap, providing the NTS with the necessary tools to monitor transactions effectively.
South Korea considers Bitcoin ETF approval
South Korea’s proactive stance on digital asset regulation mirrors global trends toward ensuring financial stability and preventing illicit activities. The country has implemented stringent regulations requiring crypto service providers to enhance anti-money laundering (AML) and know-your-customer (KYC) protocols. These measures include registering with Korean financial authorities, opening corporate bank accounts, and providing real-name accounts to clients.
The consideration of Spot Bitcoin exchange-traded funds (ETFs) by officials further highlights the country’s commitment to creating a regulated and transparent virtual asset market. As the virtual asset sector continues to evolve, South Korea’s efforts to introduce a tracking system signify a significant step towards achieving tax transparency and integrity in financial transactions involving digital currencies.
