In South Korea, the Minister of Finance says that cryptocurrency tax measures, such as the 20% tax on crypto gains, will come into effect from 2022.
This measure has been delayed by three months, as it had been scheduled to come into effect from October 2021.
South Korea and the crypto tax measures
According to reports, Deputy Prime Minister and Minister of Finance Hong Nam-ki said that the entry into force of the taxation measures for the crypto sector has been delayed until early 2022, as opposed to October 2021.
The reason for the delay appears to be the growing demand by lawmakers from government and opposition parties to delay implementation ahead of next year’s presidential election.
Among the various measures is the already planned 20% tax on crypto gains of more than 2.5 million won ($2,125) made in a one-year period.
Raising the issue was Yoo Gyeong-joon of the main opposition People Power Party who said:
“No cross-border cooperation measures are in place on taxation on crypto trading gains. It simply is unfair taxation for users of local exchanges as opposed to those who trade overseas”.
For his part, Nam-ki rushes the issue, responding as follows:
“Any further delay in the already postponed enforcement will lead to the loss of public trust in government policy and undermine stability in the legal system. We have been preparing measures for the taxation for the past two years. The new law governing the digital asset, coupled with a revision to the existing one provides sufficient grounds for the government”.
Exchanges in the legislative and fiscal crosshairs
Another legislative and tax issue also concerns exchanges, on which Financial Services Commission (FSC) chairman Koh Seung-beom reportedly said the following:
“We will discuss requirements on listing and delisting of cryptocurrencies, alongside how the crypto businesses operate”.
In this sense, the top exchange in South Korea would be Upbit, which has grown 80% in market share over the past two and a half years. In this regard, legislator Min, would highlight the situation as follows:
“A total of 298 coins were listed by Upbit, about half of which, or 145, have been delisted. This shows the reckless trading of altcoins, those other than bitcoins, enabled by Upbit which received 4 trillion won in listing fees and 31.4 billion won in trading fees”.
Last month, CNBC reported that Korea’s crypto law, which took effect in March 2021, would have knocked out 60 crypto-exchanges as they did not meet the new required standards.
Only Upbit, Bithumb, Coinone and Korbit would survive, managing to continue operating in the country. The new regulation could create other fiscal constraints for the present exchanges as well.
South Korea and the exclusion of NFTs from taxation
In this mandate, which will come into force on 1 January 2022, Nam-ki is said to have confirmed that NFTs (Non-Fungible Tokens) will be excluded from the new taxation measure.
Despite their growing activity, it appears that NFTs are still to be classified as digital assets in South Korea, and regulators have yet to comment.
The situation is different in other countries, such as the US and the UK, where NFT sales are subject to capital gains tax. This does not exclude that in the not so distant future, South Korea will also subject NFTs to taxation.