Dunamu Loses First Trial in 24.8 Billion KRW Corporate Tax Dispute Lawsuit

Dunamu, which operates Upbit, the largest cryptocurrency exchange in South Korea, lost a lawsuit challenging corporate tax worth hundreds of billions of won after being excluded from venture business certification.

Seoul Administrative Court, Seocho-gu, Seoul. / Photo by Hyunmin Kim kimhyun81@

According to the legal community on the 28th, the Seoul Administrative Court Administrative Division 4 (Presiding Judge Kim Jeong-jung) recently ruled against Dunamu in the first trial of the lawsuit seeking cancellation of the refusal to revise corporate tax amounting to approximately 24.8485 billion won filed against the tax authorities.

Previously, Dunamu received venture business certification from the Ministry of SMEs and Startups in September 2017. The government amended the Enforcement Decree of the Venture Business Act in October the following year to exclude "blockchain-based cryptocurrency asset trading and brokerage" from the list of venture business industries. Dunamu, which received a cancellation notice nine months before the certification expiration date, was unable to receive tax reduction benefits.

Dunamu filed an administrative lawsuit to cancel the cancellation of the venture business certification but lost the case in 2019. Subsequently, Dunamu demanded a refund of 24.8 billion won by applying the tax reduction benefits to the 2018 corporate tax. However, when the tax authorities did not accept this, Dunamu filed the current administrative lawsuit.

During the trial, Dunamu argued, "The amended law excluding cryptocurrency-related industries from tax reduction benefits came into effect in January 2019. Through a separate lawsuit filed by Dunamu, the administrative court temporarily suspended the effect of the cancellation of the venture business certification from December 31, 2018, to January 18 of the following year."

However, the first trial court ruled that "there is no room to apply tax reduction benefits" and upheld the tax authorities' decision to refuse the revision of corporate tax. The court stated, "Tax reduction for income tax or corporate tax cannot be applied from the taxable year in which the cancellation of the venture business certification falls," and pointed out that although the amended law took effect in 2019, the cancellation of the venture business certification was already made in 2018.

Furthermore, the court added, "Unless the cancellation of the venture business certification is overturned by a prior ruling, 2018 is considered a taxable year regardless of the suspension decision." Dunamu has appealed the first trial court's decision.