Recipients of crypto airdrops, staking rewards, and hard forked tokens in South Korea will now have to pay a “gift tax” of up to 50%, local news outlet Yonhap reported on 22 August.
The publication cited South Korea’s Ministry of Strategy and Finance, which on Monday clarified that digital asset airdrops, staking rewards, and hard forked tokens should be subject to the country’s Inheritance and Gift Tax Act. The tax authority noted that such transfers could attract up to 50% tax under the law, though the actual taxation will be considered on a case-to-case basis. The Ministry of Strategy and Finance said in a statement:
“Whether a specific virtual asset transaction is subject to gift tax or not is a matter to be determined in consideration of the transaction situation, such as whether it is a consideration or whether actual property and profits are transferred.”
The clarification was given in response to a tax law inquiry from crypto exchanges in the country, with the tax authority noting that the gift tax will be “levied on the third party” which receives the virtual assets free of charge. South Korea’s Inheritance and Gift Tax Act requires recipients of a “gift” to pay a tax between 10% and 50%, and also file a gift tax return within three months of receiving it.
This lack of regulations around the virtual asset market is one of the reasons South Korea’s virtual asset gains tax law has already been postponed two times, and is now scheduled for 2025. Introduced in January 2021, the law will see crypto holders pay a 20% tax on annual gains that exceed 2.5 million won (around $1850). The country has recently ramped up its efforts to regulate crypto, with the FSC noting it will fast-track more than a dozen crypto-related bill proposals.