The government of South Korea considers necessary to exclude cryptocurrency exchanges from the category of legal entities with tax privileges. The reason is insufficient added value of such business.

The government of South Korea announced a possible revision of the current tax legislation, which will result in cryptocurrency exchanges to be excluded from the category of start-ups and small and medium-sized enterprises (SMEs), which may require a significant reduction in income and corporate taxes.

According to the current tax legislation, start-ups and SMEs can apply for a reduction in income or corporate tax from 50% to 100% within the first 5 years of existence. After the expiry of the five-year period, start-ups and SMEs in South Korea have the right to apply for tax privileges accounting to 5-30%.

The South Korean authorities explain their initiative by the fact that the crypto exchanges do not justify tax benefits, because brokerage operations with cryptocurrencies are not effective in generating added value.

South Korean cryptocurrency exchanges reportedly generated more $648 million in revenues in 2017.

It is expected that the bill will be submitted to the National Assembly for consideration by 31 August 2018. During the parliamentary hearings it will be decided whether to amend the current tax legislation.

At the same time, the government of South Korea has recently expressed itself in favor of tax benefits for those companies that develop and research the blockchain technology. Thus, the South Korean authorities unambiguously give the market a signal that they are more interested in blockchain than in cryptocurrencies.