Officials in South Korea have announced that they will tax crypto transactions at 20% from next year.
Starting in tax year 2022, equity and bond investors will be taxed on capital gains in excess of 50 million won or $ 45,000. Non-sale related transfers of crypto assets are also subject to “statutory gift and inheritance tax rates” of up to 50%
Despite the expected backlash and calls for a delay by South Korean investors, taxation will proceed as planned. Many investors complain about why crypto is singled out and why these new tax rates don’t also apply to stock market transactions. While crypto investors are against the move, a study has shown that citizens of South Korea generally support the new tax.
The plan was originally announced earlier this year during a Vice Minister Interagent meeting. The meeting was overseen by the Head of Government Coordination, Koo Yoon-Cheol.
According to the new regulations, profits from crypto transactions are now classified as “other income” and are subject to the new tax rate. Investors must report gains on virtual assets when filing income tax in May 2023. Government officials have also called for the Financial Services Commission’s (FSC) efforts to curb illegal or illicit activity in the crypto market to be extended until the end of September.
So far, 676 people have been accused of tax evasion and their digital assets have been confiscated by the Seoul authorities. Overall, the group accounted for 27.8 trillion won ($ 25 billion) of the tax gap in South Korea. As part of the process, crypto exchanges that fall under the jurisdiction of South Korea are required to share trade and transaction records.
Seoul’s crypto tax plan has been in place for months
While many South Korean digital investors know the news, it shouldn’t come as a surprise. Only last month, South Korean Finance Minister Hong Nam-ki said the government would push ahead with the tax plan.
Hong also doubled his stance that virtual assets cannot be recognized as currency and that no one can ensure the current market value of virtual assets as they are traded. “When capital gains are made from virtual asset transactions, we cannot help but collect the tax to promote tax equality,” said Hong.
Under current Korean tax law, the government benefits from “intangible assets” such as trademark rights. Cryptocurrency assets are also labeled as intangible assets in accordance with global accounting regulations. Hong went on to say that digital currencies are just virtual assets and therefore have no intrinsic value.
Taxation isn’t the only move planned by the South Korean authorities. The FSC also plans to prevent crypto-related business operators from conducting transactions with their companies. The idea is to reduce the chance that price manipulation and unfair activity will become bigger problems than they already are. The FSC reports that the number of companies falling under this limit is around 60.
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