Bithumb Wins Legal Victory in Corporate Tax Dispute

Bithumb Wins Legal Victory in Corporate Tax Dispute

In a significant legal development, the Seoul High Court’s Administration Department 1-3 has ruled in favor of Bithumb, one of South Korea’s leading cryptocurrency exchanges, in a major corporate tax dispute. The court, under the jurisdiction of Judges Lee Seung-han, Shim Jun-bo, and Kim Jong-ho, has ordered the cancellation of tax charges amounting to 130 million won (approximately $97,141). This ruling stems from a 2019 lawsuit involving allegations of improper tax reporting by the exchange.

The ruling has garnered considerable attention within the cryptocurrency industry, especially as exchanges worldwide face increasing regulatory scrutiny. The court’s decision effectively absolves Bithumb of the charges, providing a significant relief to the exchange amidst ongoing regulatory challenges.

Court Sides with Bithumb in Tax Appeal

According to a report from Naver News, the court’s decision on August 20 marked a pivotal moment for Bithumb. The exchange had appealed against the income tax imposed by several authorities, including the Yeoksam tax office. The crux of the dispute centered around accusations that Bithumb had altered its inventory valuation method without proper regulatory approval, leading to inflated profit reports and subsequent tax penalties.

However, the court concluded that Bithumb’s actions did not violate existing laws. The judges noted that the regulatory framework at the time of the exchange’s business model transition was insufficiently developed, which meant that Bithumb’s choice of valuation method was legally permissible.

Background on the Corporate Tax Lawsuit

Initially, the court had ruled against Bithumb, stating that the exchange had failed to justify its change in inventory evaluation method and did not report the change to tax authorities as required. This resulted in a significant setback for Bithumb, as it was initially hit with a 180 million won ($134,503) tax charge, later reduced to 130 million won ($97,141).

The latest ruling, however, acknowledged that in 2017, when Bithumb switched from the ‘first-in, first-out’ method to the ‘total average method’ for asset evaluation, there were no explicit accounting regulations in place. This allowed the exchange to adopt the new method without legal repercussions.

This court victory is a notable achievement for Bithumb, although the exchange remains embroiled in another legal battle related to the XENT lawsuit, as the Seoul Court continues to scrutinize its operations closely.