South Korean crypto investors will be obligated to pay taxes and declare their holdings on all of their overseas crypto assets come January 1, 2022. The mandate was announced yesterday June 3 by the National Tax Service (NTS) on their official website.
According to a report by news agency Yonhap, cryptocurrency transactions with an annual gain of more than 2.5 million won ($2,253) will now be classified as ‘miscellaneous income’ which is subject to 20% tax. In addition to this, all virtual asset gains must be reported to the government or responsible authorities when filing for general income taxes.
Violations and failure to declare assets will warrant a 10% to 20% fine deducted from the underreported asset. Criminal punishments are also possible for underreported assets exceeding 5 billion won or $4.5 million.
In his interview with Reuters on April 27, South Korean Finance Minister Hing Nam Ki shared that the taxing of gains from crypto exchanges is inevitable and the government authorities should impose taxes on gains from trading virtual assets.
The NTS of South Korea has been expressing interest in taxing crypto assets since earlier this year. The plan to levy 20% of income tax on cryptocurrency transactions was announced on May 28 via a conference held by the NTS. The announcement came after a deliberate discussion with the vice-ministerial interagency meeting presided over by the head of the government policy coordination Koo Yoon Cheol under the Prime Minister’s Office.
This tax reform is one of South Korea’s stricter approaches in regulating cryptocurrency use in the country, as well as cracking down on money laundering and fraud using crypto. The crackdown was first announced on April 21 this year after the Office for Government Policy Coordination (OPC) began to target illegal activities involving virtual assets during their special enforcement period.
The enforcement follows the anti-money laundering (AML) law and Financial Transaction Reports Act (FTRA) that took effect earlier this year.
Cryptocurrency exchange companies in South Korea are given until September to register as virtual asset service providers. Registering will help financial regulators monitor the legality of crypto business operations.
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