South Korea to Charge “Gift Tax” on Airdrops
- South Korea’s Ministry of Strategy and Finance clarified that airdrops, staking rewards, and hard forked tokens are subject to its Inheritance and Gift Tax Act.
- Under this law, recipients of “gifts” are forced to pay between a 10% and 50% tax, as well as file a tax return within three months of receiving the gift.
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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.
- The now arrested Terraform Labs CEO had reportedly converted the majority of his illicit funds into BTC using foreign exchanged not under the jurisdiction of South Korea.
- While none of the assets tied to Do Kwon were recoverable, South Korean authorities continue to seize assets and properties tied to other executives of Terra.
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- A person suspected to be Terra founder Do Kwon was arrested at the airport in Montenegro’s capital city of Podgorica with “falsified documents”.
- South Korean authorities have confirmed the individual was Do Kwon based on “photo data”, name, age, and nationality, but are still waiting for fingerprint information.
- South Korea’s FSC clarified that crypto assets will be treated as security tokens if they have the same characteristics as securities as laid out in the Capital Markets Act.
- The FSC noted that stablecoins and crypto assets that do not have an issuer will likely not fall under the definition of securities.