The country’s crypto tax rules that had been previously proposed have been accepted and will go into effect in 2022. As of now, non-fungible tokens (NFTs) are not included under the tax.
South Korea’s Deputy Prime Minister and Finance Minister, Hong Kam-ki, announced that the nation’s cryptocurrency tax rules will be enforced starting in January. Under the new regulations, South Korea will tax personal crypto income 20% if the total income is more than 2.5 million won or $2,100. In the process of confirming the new tax mandate, the Ministry of Economy and Finance has, in essence, also announced the rejection of a petition to delay crypto taxes until more research can be conducted. Hong Kam-ki added that the South Korean cryptocurrency market has exploded in size and now rivals the nation’s stock market, ergo, the time for taxation is now.
In order to best track and tax cryptocurrency in South Korea, the Financial Services Commission decided that all cryptocurrency exchanges would be required to register with the government and report transactions as requested. Meanwhile, dozens of exchanges have closed up shop in recent weeks, with just four completing the registration process.
South Korea ready to tax digital assets
According to the Korea Times, the finance ministry had originally planned for the tax to begin on Oct. 1, 2020. The deal was delayed due to South Korea’s lack of taxation infrastructure and put off until January 1, 2022. Hong claims that the infrastructure is now in place, “as backed by real-name accounts issued by commercial lenders and user data preserved and monitored by crypto exchanges.”
During a parliamentary audit of the Ministry of Economy and Finance, Hong said that “any further delay in the already postponed enforcement will lead to the loss of public trust in government policy and undermine stability in the legal system.” He adds that “we have been preparing measures for the taxation for the past two years. The new law governing the digital asset, coupled with a revision to the existing one, provides sufficient grounds for the government.”
Not everyone involved is on board with a Q1 2022 launch. Former Statistics Korea head, Rep. Yoo Gyeong-joon of the main opposition People Power Party, asked if the government was pushing to start in January despite an “unstable system for tax administration.” Yoo goes on to say that “no cross-border cooperation measures are in place on taxation on crypto trading gains. It simply is unfair taxation for users of local exchanges as opposed to those who trade overseas.”
NFTs don’t make the cut
While taxing crypto makes sense from the government’s point of view, the omission of NFTs is a bit of a head-scratcher. Despite the NFT market seeing sales in excess of $10 billion during Q3 2021, the South Korean government has not committed to labeling them as a taxable asset yet.
Even after speaking on how NFTs have become one of cryptocurrency’s biggest surprises in 2021, Kam-ki was careful not to refer to them as assets. If regulators change their minds and tag NFTs as virtual assets down the road, they will fall under the new tax guidelines.
The Times also reports that Jeong Eun-bo, current Governor of Korea’s Financial Supervisory Service (FSS), believes that NFTs will be included in collaboration with other nations in order to cinch up any possible loopholes.
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