The South Korean government is set to announce the final details of taxing income generated from cryptocurrency transactions after years of discussion about the virtual asset that yet remains in a grey area.
Quoted by South Korea’s Yonhap news agency, Finance Minister Hong Nam-ki said his ministry will announce the details next month.
“The government has continued to realign its tax system to reflect changes in market conditions, but it is especially working to refine its list of taxable items and types of tax this year,” Nam-ki added while speaking before the parliamentary finance committee.
“Personally, I believe a digital tax needs to be imposed as a new type of tax, and the government too is considering moving in that direction,” said the minister.
The South Korean government was said to be considering imposing a 20 percent tax on crypto income. Although no specific taxation standards for crypto assets have been put in place, but the finance ministry was reportedly considering re-classifying returns made on cryptocurrencies as a type of “other income.” This places crypto profits it in the same category as those earned from lotteries which has a 20 percent tax rate.
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Despite the high tax tag levied on “other income” but it remains better than being taxed as a form of capital gains, as it is currently treated, which calls rates of up to 42 percent.
Authorities are getting tough on crypto taxes
Historically, South Korea is one of the hottest investing and trading markets for cryptocurrencies. However, authorities have been hesitant to regulate the virtual asset class, due to their belief that cryptocurrency regulation could lend legitimacy to the sector.
Separately, the central bank is taking a “wait-and-see” approach over the issue of a government-controlled cryptocurrency, or a so-called central bank digital currency (CBDC), as of now.
Recently, there have been numerous reports emerging of tax authorities clamping down and going after cryptocurrency traders. The US Internal Revenue Service (IRS) also sent letters to taxpayers who might have failed to report income and pay the resulting tax from cryptocurrency transactions.
At the very core, the IRS still deems crypto assets to be property rather than currency for income tax purposes, the same as its regulatory guidance came out five years ago. That means the authority will continue to tax crypto profits and losses like those for stocks, at capital gains rates.