South Korea’s Financial Services Commission (FSC) says some NFTs (non-fungible tokens) will be taxed from next year, overturning the finance minister’s stance on the topic announced just last month. The scope of taxable NFTs is yet to be determined by the tax authorities.
Fast facts
- The FSC’s vice chairman Doh Kyu-sang said at the national assembly yesterday the South Korean government thinks that NFTs can be taxed with the existing regulations that cover virtual assets. Doh added the Ministry of Economy and Finance is currently preparing the taxation on NFTs.
- However, the FSC recognizes that not all NFTs should be taxed or classified as virtual assets — financial authorities believe that NFTs issued on a large scale with intentions to be used for investment or payment would need to be categorized as virtual assets and taxed accordingly. At the national assembly meeting, Doh mentioned that the full scope of taxable NFTs will be defined in the future by tax authorities.
- The debate on taxing NFTs has been developing since last month, when Korea’s finance minister Hong Nam-ki said that NFTs are not a part of virtual assets and therefore will not be taxed the coming year, albeit he had recognized the need for more discussion.
- South Korea’s tax law amendment stipulates that income from virtual assets over the amount of 2.5 million won (about US$2,102) be taxed at a 20% rate starting on Jan. 1, 2022. The announcement sparked controversy, with investors saying the taxation is unfair, as crypto income is to be taxed over 2.5 million won, while a 20% tax on stock capital gains is scheduled to start on Jan. 1, 2023 at 50 million won, around US$42,048.
- Lawmakers from both the ruling Democratic Party and the conservative People Power Party proposed bills to push back taxation on crypto gains by one or two years. The national assembly’s tax subcommittee under the Strategy and Finance Committee has already started discussing policies on easing the tax burden on virtual assets.