The South Korean tax authority is trying to track the movement of ICO funds raised in foreign countries into its domestic markets.
The ICON Foundation, creator of the ICON (ICX) project, has issued an official response to the news that South Korean tax authorities are investigating its technical partner, ICONLOOP.
In a statement published on Monday, the chairman of the ICON Foundation, Min Kim, said that the ICON Foundation would not be affected by the investigation, noting that ICONLOOP is operated as a separate entity.
The ICON Foundation is a non-profit organization based in Switzerland. In late 2017 it conducted an initial coin offering for the native coin of the ICON blockchain, ICX, raising over $42 million in the process.
ICONLOOP is the technical partner of the ICON Foundation, operating out of South Korea, and creator of the “loopchain” technology upon which ICON is based. It has previously been employed by the Seoul government in various blockchain pilots, including explorations into COVID-19 tracking apps, citizen rewards and mobile driving licenses.
But past relationships apparently counted for very little at the end of February, when the Seoul Regional Tax Office dispatched 10 employees to ICONLOOP’s headquarters in Euljiro. The investigation is reportedly under way, according to a local outlet article, Paxnet, from March. 8. Such investigations are said to typically last 3 months, with the final judgement expected to be revealed in June.
ICONLOOP is the second blockchain firm to be investigated by Korean tax authorities this year. In January it launched an investigation into the HN Group — issuer of the HDAC token.
Official tax laws for the issuance of virtual assets in South Korea are expected to be implemented next year. In the meantime, the National Tax Service has initiated tax evasion and accounting audits for large domestic virtual asset issuers.
Specifically, the tax office is investigating possible tax evasion that occurs when virtual assets issued by overseas foundations are transferred into South Korea. ICONLOOP is under investigation regarding the possible transfer of the Ethereum (ETH) funds raised by the ICON Foundation in its 2017 ICO, the details of which have not yet been disclosed to authorities. ICONLOOP reportedly argues that it doesn’t need to disclose the details of such transfers, since it operates as a small or medium-sized business, reports Paxnet.
In Monday’s official statement, ICON’s Min Kim, emphasized the legal and jurisdictional distance between the foundation and ICONLOOP, saying:
“We want to make it clear that the ICON Foundation is not under investigation by the Korean National Tax Service authorities. The ICON Foundation is regulated by the Swiss Financial Market Supervisory Authority (FINMA).”
Kim said the investigation would not affect the ICON Foundation, or the ICON project at large, adding that all legal requirements have been met. Kim said: “ICONLOOP is operated independently from the ICON Foundation. ICONLOOP is an important technical partner for the ICON Foundation.” He added further:
“We are confident that this investigation would not affect the deliverables and progress for the ICON project.”
Cointelegraph sought further comment and clarification from the ICON Foundation and ICONLOOP. This article will be updated should they reply.
