Crypto users in South Korea fear the government could impose a hefty 20% tax on any gains obtained through trading cryptocurrency.
The income tax department at the Ministry of Economy and Finance has begun reviewing taxation plans for gains obtained through virtual asset transactions after taking over from the property tax department, which oversees capital gains and gift taxation.
The shift has prompted some experts to speculate the government will start to categorise gains from trading crypto as “other income” instead of capital gains, local media reports.
“The finance ministry is yet to finalise its direction, but it surely has become more likely for the income from virtual asset trading to be labelled as other income, not as gains from transfer of capitals like real estate properties,” said a government official.
Under South Korea’s local tax law, “other income” encompasses honorarium income, prize winnings, and other mediums which are infrequent, unusual, and significant in size.
Anything classified as “other income” is subject to 20% tax on 40% of the total income, with the remaining 60% being deductible.
If categorised as such, the Korean tax bureau can begin imposing tax on gains made from trading virtual assets immediately.
However, to tax crypto trading income as capital gains, it would need to first gather information of virtual asset trading from cryptocurrency exchanges to obtain grounds for taxation and to calculate fair market prices.
The Korean tax authority has already started labelling gains made by foreigners from trading virtual assets as “other income” and has been collecting duties indirectly via crypto exchanges.
Interested in reading more South Korea-related stories? Discover more about crypto exchange Bithumb fighting back against what it calls a “groundless” $70 million tax bill.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.