South Korea slams 20 percent tax on cryptocurrency gifts to be paid in fiat currency
South Korea slams 20 percent tax on cryptocurrency gifts to be paid in fiat currency
Beginning on January 1, 2022, the South Korean tax authorities have announced that they will begin taxing cryptocurrency gifts and inherited tokens as a result of the government's tax reform.
It is expected that a 20 percent tax on bitcoin and other cryptocurrency profits will be implemented, with the taxes having to be paid in fiat currency instead of cryptocurrency profits.
This announcement follows the government's recognition of cryptocurrency as a form of financial asset, which was made earlier this month. Tax-exempt hobbies such as bitcoin and other cryptocurrencies will be removed from the list of permitted pastimes.
Those who receive or inherit cryptocurrency from family or friends will be required to pay tax on it, according to South Korea's National Tax Service (NTS), which is the country's primary tax authority.
Despite the fact that the National Assembly has postponed taxation of cryptocurrency trading gains until at least 2023, when the proposal is enacted, investors will be able to trade tax-free until that time is reached.
Profits from digital assets will be subject to tax if they exceed 2.5 billion won (approximately $2,300) in value. Gains made up to this point are exempt from taxation.
Earlier Attempts at Taxation
South Korea attempted to levy the taxes beginning in 2020, but the government was unable to move forward due to opposition from cryptocurrency enthusiasts and lobbyists on several occasions.
The National Taxpayer Service (NTS) has announced the addition of a new tool to its website that will assist taxpayers in complying with new legal requirements regarding cryptocurrency gifts and inheritances. The tool will be available to taxpayers on the NTS website starting today.
This widget can be used to calculate the amount of money owed to the Internal Revenue Service (IRS) by someone who receives a windfall from cryptocurrency.
With the help of data from the "top four" cryptocurrency exchanges (Upbit, Bithumb, Korbit, and Coinone), the tool will calculate the fiat value of a token gift in U.S. dollars.
The price of cryptocurrency at the time of inheritance or token receipt will no longer be used; instead, citizens will be required to use an application to determine a two-month average price for the cryptocurrency.
When it comes to token price volatility, the NTS appears to be concerned that if prices fall, clever investors will attempt to give tokens away as gifts in order to avoid potentially large tax bills.
Despite the fact that the organization did not specify the time period covered by these two-month average rates, it is likely that they included the month preceding receipt as well as the 30-31 days immediately following receipt.
Aftermath of the Announcement
Following this announcement, more than 38,000 citizens have already signed a petition expressing their dissatisfaction with the decision. By March 31, if the petition has received 200,000 signatures, the South Korean government will be compelled to issue an official statement in response.
A revision to the specific financial transactions act is expected to begin in March, which will subject cryptocurrencies to increased regulatory scrutiny as a result of this.
