Key Takeaways:
- Terraform Labs have been charged with tax evasion and has been fined $78 million.
- More taxes and penalties might be imposed on the firm.
The crypto space got shook to its core when LUNA followed a downward trend throughout a week and UST lost its peg twice. Just when Do Kwon was coming up with revival plans for the ecosystem, the company has been charged with tax evasion and fined $78 million or 100 billion won.
Naver has reported that the National Tax Service had launched an investigation against the parent companies, The Anchore Company, and Terraform Labs. The tax investigation confirmed that the firm was evading taxes, both corporate and income. The commission has therefore imposed an income tax of 4.66 billion won and a corporate tax of 44.47 billion on Terra Virgin, a subsidiary of the Virgin Islands, owned by Do Kwon, Shin, and Han. It was also found that the Chairman of the company ‘Shin’ who earlier denied having any association with Terraform Labs, holds an 8% stake and has also been appointed as a registered director.
Terraform Labs, which is not native has still been regarded as a domestic corporation, and therefore, the taxes have been imposed. According to the Corporate Tax Act, the place of actual management of any corporation plays an important role in determining the taxes to be imposed. Though the company registration was done in Singapore and the Virgin Lands, the place of its actual management was done in Korea, and the board of directors includes Koreans and the natives. That is why even the donations made to LFG by Terra Virgin, Kwon, and others were also viewed as a source of income.
The National Tax Service considers the firm responsible for the Luna incident and may also impose another tax worth 100 billion. It has been found that the company was sending the token to LFG from Terra Singapore in disguise as a gift to cover up for the loss of the anchor protocol. The commission has blamed this for the increased market cap of Terra and Luna. Therefore, any bitcoin sent to LFG from Kwon is likely to be taxable.
The liquidation of the headquarters of Terraform Labs in Busan and the Seoul branch on the 4th and 6th respectively, have also raised the National Tax Service’s suspicion. So, it can be expected that Terraform Labs will be charged with more penalties in the future.
