The South Korean government has announced a 20% tax rate on income generated by cryptomoney trading.
After a meeting of the Fiscal Development Review Committee on July 22, the Ministry of Economy and Finance published its revised tax code detailing the new rules.
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In a section entitled, „Taxation of income from virtual asset transactions“, the ministry introduced the new rules with a note that currently, virtual assets of personal corporations (resident and non-resident) and foreigners are not subject to tax.
The government states that it is now necessary to introduce taxes on virtual assets, noting the approach taken by other countries, where crypto currencies are already taxed under similar regimes for income from trading in shares and derivatives.
What the new tax rules on crypto currencies stipulate
Under the new framework, gains from virtual currencies and intangible assets will be classified as taxable income, calculated on an annual basis. Income from virtual assets below 2.5 million won per year (USD 2,000) falls below the minimum threshold and will not be taxed.
Above the minimum threshold, the tax rate is set at 20%, on a par with the basic tax rate for most other taxable income and capital gains in South Korea.
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The rules provide a guide for calculating the income derived from trading in cryptomonies, which must be reported and paid annually every May.
Foreign and non-resident corporations trading on South Korean stock exchanges will also be subject to tax: According to the new rules, Korean exchanges will be responsible for deducting the tax from the profits of the transaction and paying it to the Korean customs office.
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The National Assembly will receive the revised tax code for approval before September 3. The new rules, if approved by parliament, would take effect on October 1, 2021.
Before the new tax regime
As Cointelegraph reported earlier, the South Korean government has spent months reviewing how to update its tax regime to respond to the trade in virtual assets.
Discussions in the country’s private sector recently, in mid-July, seemed to indicate that a 20% capital gains tax would be established for crypto-currency earnings.
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Legislators have also discussed the classification of virtual assets as goods where transactions are made for the purpose of selling them. A court ruling indicated that:
„Until now, virtual assets have been recognized only on the basis of currency and have not been subject to income tax, but recently, virtual assets (such as Bitcoin) are increasingly being traded as goods with property value.