Dunamu, which runs Upbit, encountered a setback in a recent legal clash over corporate taxes. As per The Korea Economic Daily, the firm lost a 24.8 billion won (about $18.7 million) lawsuit centered on its tax classification.

The issue emerged when Dunamu was removed from the list of registered venture firms in December 2018. This came after a court ruling that stated Dunamu no longer qualified for venture status and the related tax benefits.

Dunamu received venture company certification in September 2017, approved by the Ministry of SMEs and Startups. Yet, this certification was revoked in December of the next year. The revocation resulted from an alteration to the Enforcement Decree of the Venture Businesses Act in October 2018.

This modification excluded “blockchain-based crypto asset trading and brokerage” from the venture business category. Consequently, Dunamu lost certification and the associated tax incentives.

In an effort to address financial challenges, Dunamu pursued a tax refund of 24.8 billion won in August 2020. Their argument centered on their entitlement to venture company tax benefits until the end of the 2018 tax period.

Unfortunately, the request was denied, compelling Dunamu to escalate the matter by initiating an administrative case against tax authorities. This move followed an adverse judgment from the Korean Tax Tribunal.

Dunamu’s Corporate Tax Benefit Dispute

Dunamu's Corporate Tax Benefit Dispute

Dunamu also noted an updated edition of the Act on Special Cases Concerning Taxation Restrictions that took effect in January 2019. This modification omitted tax reductions for cryptocurrency-related sectors.

Moreover, Dunamu emphasized its legal steps, resulting in the administrative court temporarily halting the consequences of the venture company certification revocation from December 31, 2018, to January 18, 2019.

However, the court dismissed Dunamu’s claims, asserting that tax relief couldn’t apply to the tax year that encompassed Dunamu’s venture status removal.

The court upheld the tax authorities’ decision, underscoring that Dunamu’s venture status had been revoked in 2018, irrespective of the amended Taxation Act’s application.

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