South Korea’s finance minister Hong Nam-ki gave a firm “no” at the National Assembly to lawmakers asking for crypto taxation to be delayed until the industry is fully prepared.
Fast facts
- Minister Hong insisted the plan to tax capital gains from cryptocurrency transactions should be executed as planned. The amended tax law stipulates that crypto income over the amount of 2.5 million won (about US$2,132) be taxed 20% starting Jan. 1, 2022. “The virtual asset market has grown to be as big as the KOSPI (Korea’s stock market),” Hong said. “It would be a problem for fair taxation if we do not tax where there is income.” A further delay would only cause market confusion, he added.
- The tax law amendment sparked controversy, with some saying taxation is too early especially when the government has yet to prepare sufficient protective measures for crypto investors. Other crypto investors argued it was unfair, as crypto income is taxed over 2.5 million won, while stock capital gains taxes start at 50 million won, which is around US$42,600. Moreover, stock capital gains are to be taxed from 2023, a year later than crypto taxation. The government explained that there are special tax benefits to income from certain financial investments, and virtual assets aren’t categorized as financial assets in South Korea — hence the lower threshold for tax deduction.
- The imbalance between tax deductibles in crypto gains and stock gains caused an anonymous person to post an online petition on the presidential Blue House webpage, to stop what the person viewed as “discrimination.” More than 50,000 people have since signed the petition.
- Conservative party lawmaker Yun Chang-hyun and Yoo Gyeong-joon proposed bills to delay the taxing by one to two years, while democratic party lawmaker Noh Woong-rae proposed characterizing crypto capital gains as income from financial investment.
- Lee Dong-keon, professor of tax accounting at Hanbat National University, told Forkast.News in an interview he agrees that crypto taxation should go on as scheduled. However, he argues taxing crypto should be the same as taxing stock gains. “The National Tax Service claims that [crypto] is not a financial asset, but a part of ‘other assets’ or intangible assets,” Lee said. “Regardless of category, if the characteristics [of the investments] are similar, I think it’s right to tax it the same as stock capital gains tax.”