South Korea May Review Crypto Tax Law ahead of 2021 Regulations
The South Korean government said that it is conditionally prepared to carry out a review of crypto tax regulations – a year ahead of the promulgation of the country’s first crypto-specific tax law.
Per news agency Yonhap, Hong Namk-ki, the Deputy Prime Minister and the nation’s finance minister, stated that Seoul was willing to change the way it classifies crypto-related earnings in tax declarations – a factor that could possibly lead individuals and companies to pay less tax on their cryptoasset holdings.
As previously reported, from October next year, individuals who earn more than USD 2,100 per year from crypto-related activities will be obliged to pay 20% tax on their “excess” earnings (anything they earn above the USD 2,100 mark). Non-residents or overseas corporations will be obliged to submit tax data to crypto exchanges, where they could be taxed at source.
But critics of the new law claim that it is unfair that crypto has been classified as “other income,” rather than “financial assets.” The latter classification, used for stocks and other conventional assets, has a sliding tax rate and a much higher threshold. Indeed, individuals do not need to pay tax on the first USD 42,000 they earn from investments in KOSDAQ stock market-listed companies.
Hong suggested that a move to the “financial assets” class was a distinct possibility – but added a caveat, saying,
“As long as we can monitor [crypto] transaction details in a thorough, transparent and systematic manner, it will be possible for us to conduct a review into the issue of taxing [cryptoassets] as financial assets.”
The Deputy Prime Minister was speaking to the National Assembly’s Planning and Finance Committee, where he was challenged on the matter of tax by an MP for the largest opposition party, the People Power Party, Seo Il-jun.
Seo stated that the “other income” category was usually reserved for slot machine winnings and lottery winnings. He said that lumping crypto into this tax category was a “hostile” move and added,
“Cryptoassets should not be treated in the same manner as slot machines.”
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