The South Korean government has finalized a 20% tax rate for income generated from cryptocurrency trading.
July 22, the Ministry of Economy and Finance published its revised tax code detailing the new rules.
In a section headed, “Taxation on Virtual Asset Transaction Income,” the ministry introduced the highlighted that the new rules at present, both personal (resident and non-resident) and foreign corporations’ virtual assets are non-taxable.
The government stated that introducing taxation for virtual assets is now necessary while pointing to approaches taken by other countries, where cryptocurrencies are already taxed under similar regimes for income from stocks and derivatives trading.
Gains made from virtual currencies and intangible assets will now be classified as taxable income, calculated annually.
Income from virtual assets below 2.5 million won per year ($2,000) that falls below the minimum threshold will not be taxed.
Above the minimum threshold, the tax rate is set at 20%, on a par with the basic tax rate for most other taxable income and capital gains in South Korea.
The rules provide guidance for calculating income derived from crypto trading. This should be reported and paid annually each May.
Meanwhile, Non-residents and foreign corporations that trade on South Korean exchanges will also be taxed under the new rules.
Korean exchanges will be responsible for deducting the tax from transaction gains and while paying to the Korean customs office.
The National Assembly will receive the revised tax code for approval before September 3. The new rules, if approved by parliament, would then come into force on Oct. 1, 2021.
South Korea’s government has spent months reviewing how to update its tax regime to respond to the trading of virtual assets.
Discussions in South Korea’s private sector had appeared to indicate that a capital gains tax of 20% would be established for cryptocurrency gains.
Lawmakers have also discussed on classifying virtual assets as goods where transactions are made for the purpose of sale.
A court judgment indicated that:
“Until now, virtual assets have been recognized only as a function of currency and have not been subject to income tax, but recently, virtual assets (like Bitcoin) are increasingly being traded as goods with property value.”