South Korea’s Financial Authorities to Include Cryptocurrencies in New Taxation Framework
- South Korea’s Deputy Prime minister, who also doubles as Minister in charge of the Finance docket, has revealed their intention of placing cryptocurrencies under the list of taxable items.
- This was revealed after the jurisdiction’s legislature passed amendments to facilitate crypto trading legally.
A local publication reported that South Korea’s Ministry of Strategy and Finance aims to introduce taxes for digital assets, with the rate expected to reach 20 percent. The announcement was made during the Financial Parliamentary committee meeting chaired by Minister Hong Nam-Ki on 17th July.
According to Hong Nam-Ki, the tax system aims to adapt to current market trends, including virtual assets. The government will work on a policy that will list the items liable to be taxed and what kind of taxation these items would incur. The taxation policy will be discussed through the next quarter, with the final report expected to be submitted to the legislature in September this year.
Legality and Regulation of Crypto Activities in South Korea
Earlier in March, the South Korean legislature passed two amendments that facilitated the legal entry of crypto traders in the jurisdiction after almost two years of deliberations. This would, however, be compliant with South Korea's legal requirements, with a voracious appetite for crypto assets being recorded in the jurisdiction.
This put the crypto activities in the scope of taxable items as the Finance Minister, who also doubles as Deputy Prime Minister highlighted that they were looking to impose taxes where there is income. They intend to zero in on the crypto mining activities and Initial Coin offerings (ICOs).
In January, the Finance Ministry brought forth a proposition to impose a 20% tax on crypto revenues. This sparked speculation that the Finance Ministry was looking to re-categorize revenues generated from crypto as other income to fit specific taxation brackets the same as lottery winnings. This would be beneficial for crypto traders, as the alternative of classifying crypto-assets as capital gains would attract steeper tax rates of over 42%.
He also mentioned that they had engaged in global discussions over a new digital tax framework. He added that such laws are beneficial for S.Korea's economy as it would increase revenue through taxing foreign crypto firms used by local residents, adding that local crypto firms would also be susceptible to taxation from foreign jurisdictions. This was after they were involved in a tussle with Bithumb after the latter challenged the $69 million tax imposed by National Tax Service (NTS).