South Korean Tax Authority Considering 20% Crypto Income Tax
- A new crypto tax proposal, currently reviewed by income tax office officials, could see crypto income taxed at 20%.
- It is speculated that the proposal will categorize gains from cryptocurrency trading as “other income”.
A 20 percent tax on income generated from cryptocurrency transactions is currently being considered by the South Korean government, local news outlet The Korea Times reported on 20 January.
According to the report, the South Korea’s Ministry of Economy and Finance has tasked its income tax office with reviewing a new proposal, which could clarify how cryptocurrencies are taxed in the country.
An anonymous official reportedly said that the proposal’s plan has not been finalized, but that the government was considering a 20 percent tax on cryptocurrency income.
These news raised speculation that the government may categorize gains from cryptocurrency trading as “other income”, not capital gains. This income category includes gains made from lectures, lottery purchases and prizes.
Last December, a ministry spokesperson confirmed to The Korea Times that the government will enhance its ability to tax cryptocurrencies through a “revised bill”, which would be drawn in the first half of 2020.
A clear cryptocurrency taxation scheme will be welcomed in South Korea, considering that last November the tax agency imposed a $68.9 million tax bill to local cryptocurrency exchange Bithumb. According to recent reports, the exchange has taken the tax authorities to court, claiming that the bill had no legal basis.
Even though cryptocurrency taxation can be considered a nascent field, most governments with developed economies have been considering the gains made from cryptocurrencies as capital gains.
Last October, the U.S. Internal Revenue Service (IRS) issued a guidance on calculating taxes owed on cryptocurrency holdings, which reconfirmed the status of cryptocurrencies as a form of property.
The guidance further stated that paying for a service results in capital gain/loss, which is calculated as “the difference between the fair market value of the services you received and your adjusted basis in the virtual currency exchanged”.
- One of the largest South Korean commercial banks, KEB Hana Bank, partnered with crypto custodian BitGo in order to set up a new crypto custody venture in the country.
- The new venture, which will use BitGo’s crypto security expertise and Hana’s experience in financial services and compliance, is expected to launch in the second half of 2024.
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- The IRS filed its claims against FTX under the “Admin Priority” classification, which could allow it to supersede the claims of other creditors in the bankruptcy case.
- The largest of the claims is against Alameda Research LLC, with the IRS claiming around $20 billion in partnership taxes and close to $400 million in payroll taxes.
- 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.