The government of South Korea has recently announced that it will implement a 20% tax on income generated by way of cryptocurrency trading.
Revision Of Tax Rules In Korea
The Tax Development Review Committee held a meeting on the 22nd of July, 2020, with the Ministry of Economy and Finance publishing the revised tax code. This tax code went into detail in regards to the new rules.
In a section aptly titled “Taxation On Virtual Asset Transaction Income,” the ministry introduced a set of new rules. The rules noted that, at present, both foreign and personal (Resident and non-resident) virtual assets are non-taxable.
Taxation Just A Matter Of Time
Even so, the government made it clear that it sees virtual asset taxation as necessary, and plans to introduce it in due time. As justification, the Korean government highlighted other countries and the approaches they have made. Notably, it highlighted that it operated under tax regimes similar to that of taxing income from derivatives or stocks trading.
Under the new framework, virtual currency and intangible assets, particularly gains made through them, will be seen as a taxable income, and will be calculated annually. The minimum threshold for taxable income through virtual currency and intangible asset trading is below 2.5 million won per year, or about $2,000.
Taxation Mandated, Handles By Exchanges If Foreigner
Once you go past that minimum threshold, however, the tax rate is designated at 20%, which is on par with the basic tax rate for most other forms of taxable capital gains and income within Korea.
The rules also provide guidance in regards to calculating income that crypto trading has given you, and mandates that it must be reported and paid annually, each May.
Foreign corporations and non-residents that trade on South Korean exchanges will be taxed, as well. Under the new rules, the Korean exchanges themselves are responsible for the deduction of tax from transaction gains, and are mandated to pay it to the Korean customs office.
As it stands now, the revised tax code will be presented before the National Assembly before the 3rd of September, 2020. Should these new rules then be approved by parliament, it will be put into force on the 1st of October, 2021.
This new tax regime has come after months of intense revision in order to respond to the rampant increase in virtual asset trading within the country. While taxation is never appreciated, it’s needed to turn the wheels of a state.