South Korea has proposed introducing a 20% tax on cryptocurrency trading profits in the country, the country’s Ministry of Economy and Finance said on 22 July.
The proposal states that introducing taxation for digital assets has become necessary, considering that other countries are already taxing cryptocurrencies similarly to income from stocks and derivatives trading. The revised tax code also proposes that only crypto trading profits above 2.5 million KRW (around $2,000) should be taxed, and that anything below that will fall below the minimum threshold, and will not be taxed.
The new tax rules will be presented for approval by the National Assembly on 3 September, and if approved, will come into force on 1 October, 2021. The proposal also provided guidance for calculating income from crypto trading, with the profits being based on the difference in the asset’s won price at the time of acquisition, and its price at the time of sale. If traders do not provide the acquisition price of the asset, it will be assumed it was 0.
The new tax rules will not only apply for residents of Korea, but also to non-residents and foreign companies that use Korean exchanges for their trading activities. While Korean residents will be obliged to keep accurate records of their crypto activity, when it comes to foreign corporations and non-residents that responsibility will fall on the exchanges, which will have to deduct the tax from transaction gains.
The Korean government has spent months reviewing its tax regime for virtual assets trading. Rumors of the 20% tax for crypto trades has been floating around since January, when an anonymous official reported that, while the plan was yet to be finalized, the government was considering 20% taxation.