Understanding Cash Receipt Obligations for Transactions paid with Cryptocurrency

As a foreign investor in Korea, understanding the complex tax regulations is crucial for smooth operations. One area that has been a subject of recent clarification is the issuance of cash receipts for transactions involving cryptocurrencies. This article provides an overview of the tax implications and obligations surrounding cryptocurrencies for businesses operating in Korea.

The National Tax Service (NTS) has recently issued an authoritative interpretation clarifying that cash receipts are not required for transactions involving the purchase of goods or services paid for with cryptocurrencies. This interpretation is based on a prior example provided by the Ministry of Strategy and Finance (2021.03.12).

In the context of a corporation operating a cryptocurrency exchange, members who trade cryptocurrencies through the exchange pay a certain amount of commission to the corporation in the form of cryptocurrencies. The corporation in question asked the NTS if they were obligated to issue cash receipts for transactions where they received cryptocurrencies in exchange for goods or services, according to the Income Tax Act or Corporate Tax Act. The NTS responded with the aforementioned authoritative interpretation.

According to Article 162-3 of the Income Tax Act and Article 117-2 of the Corporate Tax Act, businesses that primarily supply goods or services to consumers are required to join the cash receipt system and issue cash receipts for transactions. However, the NTS clarified that cash receipt issuance is not mandatory for transactions paid for with cryptocurrencies.

There are exceptions to the mandatory issuance of cash receipts, as outlined in the Income Tax Act and Corporate Tax Act. For instance, businesses that have registered for VAT (Value-Added Tax) and have issued invoices or tax invoices can be exempt from issuing cash receipts.

For foreign investors in Korea, understanding the regulations surrounding cryptocurrency transactions and cash receipt issuance obligations is essential. The recent NTS interpretation has clarified that cash receipts are not required for transactions paid for with cryptocurrencies. This information can help businesses navigate the tax implications of cryptocurrency transactions and ensure compliance with Korean tax laws.