Digital Assets to Be Taxed In South Korea

“Whether anyone owns them or gets them as a donation or inherit them or even receive them as a gift, none of the digital assets will be exempted from tax”, says the National Tax Service of South Korea (NTS). For the purposes of imposing the tax, major crypto firms of the country have been given the responsibility of identifying the digital assets liable to be taxed by the authority.

A new tax policy is going to be introduced in South Korea which entails bringing digital assets within the tax net. The policy will be implemented by the National Tax Service of South Korea (NTS), which is the national tax collection authority. NTS told that the policy will come into force in 2022 and none of the owners of digital assets will be exempted.

NTS clarified that in case digital assets were either inherited or acquired as a gift or donation, even then they will be taxed. The tax rate will be calculated per month since the date on which the digital asset(s) was/were acquired.

The task of identifying which digital assets are to be taxed has been given to several Virtual Asset Service Providers (VASPs). On behalf of NTS, the firms namely Coinone, Dunamu, Korbit and Bithumb Korea will be doing the tax determinations. All of these firms are the leading VASPs of South Korea and retain most of the South Korean taxpayers.

In a separate report of NTS, a detailed explanation of how crypto tax liability will be determined has been provided. In this report, NTS notes that it will first determine what digital assets have been traded on the exchange platforms of VASPs. Thereafter, tax liability will be imposed on the basis of any given asset’s daily trade volume and value average.

It is now glaringly apparent that tax will be collected against digital assets in South Korea. The application of the tax will be on the taxpayers owning any digital assets directly or indirectly. The reporting law introduced in June 2021 for crypto exchanges will be playing a crucial part in the determination of crypto tax. Even if an exchange’s customer would try to hide his/her digital assets, he or she simply cannot. In fact, VASPs would have already provided the data to the authority beforehand.

Meanwhile, capital gain tax on crypto, which was supposed to be collected at the beginning of 2022 has been delayed by NTS. It was initially proposed that 20% tax will be collected under capital gain tax from South Korean crypto owners. However, the tax was to be collected from those taxpayers whose profits on digital assets exceeded US$ 2,105 per annum. For the time being, NTS has decided to postpone the collection of CGT on crypto which would now be enforced in 2023.

By Edward Richardson
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