The tax authorities of the South Korean government have announced plans to begin taxing crypto gifts and inherited tokens starting on January 1, 2022.
According to the country, it intends to implement a 20% tax on bitcoin and other cryptocurrency profits, but the taxes will have to be paid in fiat currency.
This announcement comes following the government’s recognition of cryptos as financial assets. BTC and other cryptocurrencies will no longer be classified as tax-free hobbies.
The nation’s primary tax authority, the National Tax Service (NTS), has declared that citizens in South Korea will be compelled to pay tax on cryptos they are given or inherit from family members or friends.
Despite the fact that the National Assembly has placed a tax delay on crypto trading gains, investors will be allowed to trade tax-free until at least 2023, when the idea is enacted.
The tax on digital assets will be triggered when profits made on the cryptocurrencies exceed 2.5 billion won, or about $2,300. Gains made up to this point will be free from taxes.
Earlier Tax attempts
South Korea first attempted to levy the taxes starting in 2020, but pushback from crytocurrency enthusiasts and lobbyists saw the government stall in the implementation of these taxes several times.
The National Taxpayer Service (NTS) has announced the installation of a new tool on its website to assist taxpayers in meeting their new legal requirements for cryptocurrency gifts and inheritances.
This widget can be used to calculate how much money someone owes the IRS if they receive a cryptocurrency windfall.
The tool will use data from the “top four” crypto exchanges – Upbit, Bithumb, Korbit, and Coinone—to calculate the fiat value of a token gift.
Instead of using crypto prices at the time of inheritance or token reception, citizens will be required to use the application to determine a two-month average price.
The NTS is concerned about the volatility of token prices and appears to be concerned that if prices decreased, clever investors would try to make gifts to avoid potentially large tax bills.
Although the organization did not clarify what period these two-month average rates were supposed to cover, it is likely that they covered the month prior to receipt as well as the 30-31 days afterward.
Aftermath of the Announcement
Following this announcement, over 38,000 citizens have already signed a petition in protest. If the number of signatures on the petition reaches 200,000 by the end of March, the South Korean government will be forced to make an official response.
An expected revision to the specific financial transactions act is expected to commence in March and will see crytocurrencies fall under new regulatory scrutiny.