South Korea's government has tabled its final proposed tax code on cryptocurrencies with the tax rule set to be implemented from October 2020. The new tax rule will see a 20% income tax on crypto gains take effect as South Korea's government scales its effort to capture digital asset revenue.
The final documentation was agreed upon by South Korea's Ministry of Economy and Finance, which met on July 22. It has since published the revised tax code paying attention to digital assets in a section dubbed ‘Taxation on Virtual Asset Transaction Income.' Notably, crypto transactions within South Korea's financial ecosystem were not subjected to any taxes prior to this development.
South Korea's Crypto Tax Code
According to the authorities, a movement towards taxation was inevitable, given some jurisdictions like Singapore have already made progress in this area. Consequently, South Korea is now catching up after an increase in the use of Bitcoin and other crypto-assets for business activity. With the new tax code in play, gains made from crypto will be categorized as taxable income, obliging the associated parties to report annually.
The framework stipulates that income above 2.5 million Won annually ($2,000) is subject to the outlined tax, while anything below will not be taxed. It goes on to provide guidelines on how to report the crypto trading activity with the payment month set for May. It is also quite noteworthy that this new tax code will apply for both residents and non-residents operating on South Korea domiciled crypto exchanges.
This work has been in progress for over six months, and a final proposal comes as a relief to stakeholders such as courts who had been waiting for better clarity on crypto taxation. A recent judgment had echoed these sentiments, pointing out the need for income tax classification on crypto assets,
“Until now, virtual assets have been recognized only as a function of currency and have not been subject to income tax, but recently, virtual assets (like Bitcoin) are increasingly being traded as goods with property value.”