Cryptocurrencies in South Korea will be taxed at 20% with effect from Jan 2022. The Finance Minister, Hong Kam-ki, announced on Thursday. If the total income exceeds $2100, the personal crypto income will be taxable according to the new regulations.
A petition that opposed immediate implementation of crypto taxes has been declined since the virtual assets will be officially taxable in not less than three months. The skyrocketed rise in the cryptocurrency market in Korea is competing with country’s stock market, Ergo. Therefore, Hong Kam-ki expressed that the ministry can not delay the execution of the tax mandate.
“any further delay in the already postponed enforcement will lead to the loss of public trust in government policy and undermine stability in the legal system,” he added.
According to industry insiders, the ministry had aimed to begin taxation starting from Oct 1st, 2020. However, the delayed process in setting up taxation infrastructure led to the postponement of the tax effect date— which is now Jan 1st, 2022.
Earlier in September this year, the Financial Service Commission made it obligatory for all cryptocurrency exchanges to register their platforms with local banks with real names. The move was an attempt to monitor crypto exchanges and tax crypto income accordingly. However, only 29 crypto exchanges have managed to meet the deadlines and abide by the regulations laid down by FSC.
In the announcement, the ministry has confirmed the completion of the tax structure. “As backed by real-name accounts issued by commercial lenders and user data preserved and monitored by crypto exchanges,” Hong Kam-ki stated in a parliamentary audit of the Ministry of Economy and Finance.
Although the tax is applicable for all virtual assets, the government has omitted NFTs. The finance ministry has not officially included NFTs in the taxable asset list despite more than $10 billion worth of sales in the last three months.
Non Fungible Tokens (NFTs) may not have been added to the taxable asset list; the market may see its inclusion in the upcoming years. At present, countries such as the U.S. and U.K. have imposed a capital gain tax on NFT sales. Jeong Eun-bo, the Governor of Korea’s FSS, projects Korea will collaborate with other countries to set regulations when taxing NFTs in the future. With this, Korea can work on possible ambiguities and come up with better taxation policy.
Notwithstanding, the regulatory changes and taxation policies will not affect the surge in crypto and NFT market growth, suggest industry experts. Apart from local investors and SMEs, several Korean tech giants such as Naver, Kakao and Samsung have ventured into blockchain and NFT, and the number is likely to grow in the upcoming years.