South Korea has been working towards a suitable tax system for crypto trades and profits for a while now, with different proposals and deadlines.
However, after much deliberation, the government has now put forth a viable tax plan for crypto gains.
Pay the Tax Man
Asia Today reported this week that the South Korean Ministry of Economy and Finance had issued an amendment to introduce a new tax rate for crypto trading profits. The amendment could be enacted into law in February, following a legislative notice that will last until January 21, according to the reports. However, the new tax rates won’t be levied until 2023.
Per the report, the government’s new proposal will introduce different additional taxes on capital gains. Crypto traders who make annual incomes of over 2.5 million won ($2,300) will be taxed 20 percent from their trading activities. Comparatively, the threshold is much lower for traditional stocks, with only gains higher than 50 million won ($46,000) receiving the same tax rate.
The tax rate goes even higher, reaching 25 percent for assets over 300 million won. Investors with annual profits of over 50 million won will also need to pay transfer taxes, regardless of whether they are major shareholders or not.
As for cryptocurrencies owned before the tax schedule’s 2023 implementation, authorities are still considering imposing taxes on the market price immediately before 2023 or the acquisition price.
What Date is Appropriate?
The new tax rate isn’t especially a novel development. The Ministry of Economy finalized the regime last July, following a Tax Development Review Committee meeting. The meeting concluded the government’s mission to ensure effective taxation of individuals’ and corporations’ virtual asset holdings – which, up to that point, had been non-taxable.
However, the new regime also ran into a bit of a hiccup, with industry insiders asking that the government delays its implementation. In October, the Korea Blockchain Association (KBA), one of the country’s most powerful blockchain advocacy groups, asked that the government delay implementation until January 2023
Per a report from News1 Korea, the KBA had explained that companies require a “reasonable period” to prepare for the new tax regime. The advocacy group explained that there was a short window between regulations applying to the old tax scheme and the expected start of the new one as crypto exchanges would still be allowed to report on trades falling under the previous tax code until September 2021.
Since the Income Tax Act is expected to be enforced from October 2021, companies would find it challenging to comply with the new regulations in less than 24 hours.
Last month, the South Korean national assembly ruled to extend the tax regime’s implementation to January 2022. With the new ruling setting an implementation date for 2023, crypto companies now have enough time to get in line.