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South Korean Tax Specialists Advocate for Lowered Crypto Taxation

Members of the Korean Tax Policy Association are calling on the government to consider applying a low-level tax on crypto transactions. The South Korean administration is contemplating taxing cryptocurrencies as part of its tax reform plan for 2021, but specialists feel it requires in-depth conceptualization.

The perplexing issue of crypto taxation

The tax experts aired their sentiments during a seminar where they brainstormed and saw it fit for the Korean government to consider introducing a low level of trading tax to act as a precursor to the gradual transfer income tax.

Last month, the administration revealed that it was contemplating categorizing proceeds from crypto transactions as other income, which is subjected to a 20% tax, as is the case with lottery or prize-winnings. This decision was reached because other incomes are usually infrequent, unusual, and considerable in size.

Nevertheless, this proposal seems not to be going down well with tax experts as they stipulated that profits from crypto trading ought to be subjected to transfer income taxation as spelled out in the Income Tax Act, whereby crypto-assets should be included through prior legislation.

The Korea Blockchain Association echoes these sentiments. It asserted, “Still, related laws are still absent, and the taxation infrastructure is still insufficient to cover cryptocurrencies and, as such, some supplements need to be added on the expense calculation side.”

The association feels that the expense calculation improvement ought to begin from crypto acquisition costs as this will open the door to transfer income taxation based on trading tax imposition.

It added, “Acquisition costs need to be clarified for transfer income tax imposition, but cryptocurrency acquisition costs are hard to clarify because the currencies are traded in various exchanges, and related information and data are restricted. Infrastructure needs to be established after case-by-case trading tax imposition.”

Crypto taxation taking shape

As cryptocurrencies continue gaining traction, the issue of taxing them is making airwaves across the globe. For instance, in November 2019, the tax and payments customs authority in the United Kingdom called Her Majesty’s Revenue, and Customs (HMRC) updated its guidelines for crypto taxation pertaining to both businesses and individuals.

A similar trend was noted last month in China after the Shenzhen Taxation Bureau announced the establishment of a new blockchain tax system with Ping An Group.

The South Korean experts, therefore, feel the crypto taxation issue is a tricky one, and this is the reason why thorough consultations are needed.

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Crypto.com Partners with Leading Tax Providers to Simplify Reporting Process

Crypto.com, a pioneering payment and cryptocurrency platform, has partnered with three reputable tax providers–Token Tax, CryptoTrader Tax, and CoinTracker for simplified tax reporting with the click of a button. This decision was made following requests by the Crypto.com community to be tax compliant.

Crypto adoption escalates

Cryptocurrencies are continuously being embraced across the globe based on their decentralized nature, interest in the crypto space is growing, as shown by the skyrocketing of Bitcoin searches on Baidu and Google.

This upward trend in the crypto space has necessitated relevant government agencies worldwide to necessitate tax reporting on cryptocurrencies. Individuals are required to claim cryptocurrency on tax filing documents by the US Internal Revenue Service.

Recently, the UK Tax Authority, Her Majesty’s Revenue and Customs (HMRC) updated its guidelines pertaining to crypto taxation. Companies involved buying or selling tokens were liable to tax.

Crypto.com has, therefore, heeded the call of tax filing as the forged agreement will make reporting of crypto holdings for various jurisdictions easier.

Tax reporting in the fast-paced crypto sector

Through the strategic collaboration, Crypto.com users will be able to export their historical crypto transactions to the respective platforms for the generation of the required tax reports in just a click of a button. Later on, these reports can be sent to tax filing software solutions or will be made available to a tax professional.

Kris Marszalek, CEO and co-founder of Crypto.com added, “You can’t escape death and taxes, might as well attempt to make the latter as seamless as possible. We’re thrilled to partner with leading players in this space to simplify the reporting process for Crypto.com users.”

Simplified tax reporting is a significant milestone in the crypto space based on the creation of a conducive working environment. In October 2019, crypto tax payments started being permitted in Bermuda using a stablecoin called USD Coin (USDC).

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South Korean Investors Making more than $2,260 from Crypto to be Slapped with a 20% Tax in 2022

The South Korean Ministry of Economy and Finance has announced that investors making at least 2.5 million won, or approximately US$2,260 from crypto trading, will be subjected to a 20% tax starting in 2022.

The revision of the South Korean tax code

This revelation comes following the nation’s annual tax code revision, which the National Assembly permitted in December.

According to the announcement:

“The first 2.5 million won is tax-free. For instance, if an investor makes a 10 million won profit from trading Bitcoin, 7.5 million won of that amount will be subject to the 20 percent tax.”

The report further pointed out:

“Inheritances and gifts of cryptocurrency will also be taxed. In such cases, the price of the asset will be calculated on the basis of the daily average price for one month before and one month after the date of the inheritance or gift.”

Cryptocurrency taxation has been a burning issue in South Korea since the crypto taxation bill was brought up in the nation’s parliament last year.

For instance, an influential representative of South Korea’s Democratic Party, Yang Kyung Sook, proposed an amendment to re-classify digital assets and cryptocurrency as “commodities” instead of “currency.”

Yang asserted that classifying crypto as goods rather than currency is due to investor behaviour, which he believes qualifies digital assets for a capital gains tax.

The delicate balancing act in crypto taxation

Cryptocurrency investors have been finding themselves in a difficult position because of the heavier taxes imposed on their gains, as compared with stock investment. A police officer surnamed Choi noted:

“I think it’s unfair to charge that much (cryptocurrency) tax when compared to taxes on stocks.”

Therefore, the South Korean government has been struggling to figure out how to deal with crypto taxation because the standard it intends to use is for other non-stock assets like real estate.

South Korea will Impose a 20% Tax on Capital Gains from Cryptocurrencies Next Year

The South Korean administration is not relenting on its quest to levy a 20% income tax on capital gains from crypto transactions in 2022, despite growing investor concerns for the taxation plan to be delayed.

Crypto gains will be classified as “miscellaneous income”

During a vice-ministerial interagency meeting, the South Korean government revealed that its 20% income tax plan on cryptocurrencies would continue to implement next year.

Koo Yoon-cheol, the head of government policy coordination under the Prime Minister’s office, chaired the meeting. He noted:

“Gains from cryptocurrency transactions will be classified as ‘miscellaneous income’ and will be subject to a 20 percent tax starting next year. Virtual asset gains must be reported when filing for general income taxes in May 2023.”

The Financial Service Commission, the nation’s monetary watchdog, is responsible for regulating and overseeing the cryptocurrency market. On the other hand, the science ministry is mandated with boosting the growth of the blockchain industry.

Special governmental campaign against illegal crypto activities

It also decides that the relevant authorities would extend the special governmental campaign time frame for cracking down and monitoring unlawful crypto activity to September 2021.

In February this year, the South Korean Ministry of Economy and Finance announced that investors making at least 2.5 million won, or approximately US$2,260 from crypto trading, would be subjected to the 20% income tax. It also pointed out that crypto inheritances and gifts would also be taxed. In such cases, the calculation of asset price would be based on the daily average price for one month before and one month after the date of the inheritance or gift.

Crypto taxation has been a burning issue in South Korea since the nation’s parliament last year brought up the crypto taxation bill.

Therefore, cryptocurrency investors find themselves in a difficult position because of the heavier taxes imposed on their gains than with stock investment.

South Korean Gaming Giant Wemade Faces $41 Million Tax Bill for Crypto Operations

At the hands of the National Tax Service (NTS), the South Korean gaming company Wemade, which is well-known for its advocacy in blockchain gaming, has been confronted with a massive tax demand equivalent to $41 million. This demand was made with the intention of collecting taxes. An investigation of Wemade’s cryptocurrency operations that took place between the years 2019 and 2022 led to the discovery of this new information. Specifically, the WEMIX tokens that were distributed by Wemade Tree, which is a subsidiary of Wemade, were the primary focus of the investigation.

The cryptocurrency subsidiary of Wemade, known as Wemade Tree, will start releasing WEMIX tokens beginning in January 2019 and lasting until 2022. This period of time will span from January 2019 to 2022. Specifically, this is the subject at hand. The National Transportation Safety Administration (NTS) is now conducting an inquiry into this matter, and as a consequence, the corporation is now compelled to meet a high tax responsibility. This financial setback in striking contrast to the earlier efforts done by the business, such as the development of a $100 million Web3 fund in collaboration with Whampoa Group, which is located in Singapore, is an example of how the corporation has been working to improve its financial situation.

Although WEMIX coins were removed from Korean exchanges the previous year due to data problems, they staged a successful comeback in 2023 and relisted on the same platforms. This was despite the fact that they had been removed from Korean exchanges. A large gain of roughly 90 percent occurred in the value of the token when it was relisted, and it eventually reached 3,000 Korean won, which is equivalent to approximately $2.31.

According to statements made by Wemade, the firm plans to comply with the tax regulations that are now in effect. Having admitted that it will complete its commitment to pay the whole amount by the prescribed date of February 29, 2024, the firm has said that it will do this. A representative for Wemade indicated that the firm has made public its desire to pay the tax obligation in good faith. Wemade has made this communication public. The need of more clear crypto tax regulations for the benefit of the company is brought to light by this remark.