"NTS to build W3bn integrated analytics system to prepare for individual taxation of virtual assets"

South Korea’s National Tax Service (NTS) has begun building IT infrastructure worth about W3bn ahead of the rollout of individual taxation on virtual assets in January next year. The aim is to establish a system capable of integrated analysis of transaction flows, reflecting complex trading structures and the anonymity inherent in such assets.

According to the industry on the 26th, the NTS on the 20th released preliminary specifications for the “Virtual Asset Integrated Analytics System Construction Project.” The project period runs from the contract date through Dec. 31 this year, and the total budget is W2,998,110,000, including VAT.

The core of the project is to build a system that integrates the collection and management of external data—such as transaction statements and transaction summaries submitted by virtual-asset service providers, as well as on-chain blockchain transaction information—and uses it as tax assessment data. The system will be designed to provide a comprehensive view of transaction status by taxpayer by linking to existing filing, tax account and audit data.

According to Nara Marketplace, the Public Procurement Service’s e-procurement platform, the system will also include functions to integrate, query and analyze wallet addresses, transaction histories, changes in assets and balances held on a taxpayer basis. It also plans to implement a function that visually traces transaction flows by combining blockchain data with wallet addresses linked to overseas financial accounts or virtual-asset service providers.

Audit support functions will also be strengthened. The NTS plans to streamline workflows so that investigative procedures—such as requests for support from transaction-tracing programs or requests for information from virtual-asset service providers—can be handled in a single process within the system.

In addition, it will introduce functions to detect abnormal transaction patterns and suspicious traders using artificial intelligence (AI)-based machine learning and statistical techniques. The system is also expected to provide a range of statistical information, including transaction trends by type of virtual asset and by period, as well as inflow and outflow status by provider.

The project will be pursued through an open competitive bidding process. Following a bid announcement and contract in March, design and development will begin in April. After testing and a pilot run, the target is to open the system in November.

From next year, other income tax of 20% (22% including local tax) is expected to be levied on income from the transfer or lending of virtual assets. As the taxation framework is put into full operation, building capabilities to analyze transaction information is emerging as a key task.