The South Korean government pushes forward its plan to tax crypto income beginning in January while investors and lawmakers criticize the pending tax law for its loopholes, with one lawmaker mentioning NFT goods of K-pop mega-group BTS.
Fast facts
- The National Tax Service (NTS) of Korea met with 28 domestic cryptocurrency exchanges earlier this week to provide guidance on following the coming crypto tax law, such as in submitting virtual asset transaction statements to the authorities. Meanwhile, lawmaker Noh Woong-rae, who has been actively requesting a delay in crypto taxing, said yesterday through a press release that the government’s plan to tax virtual asset gains from next year is “excessive administration” when there are just too many loopholes in the system.
- Noh insisted there is yet structure in the system to tax NFTs (non-fungible tokens), mentioning the much anticipated plan to make NFTs of globally popular K-pop group BTS’s merchandise. He asked rhetorically, “When no one can tax a single penny [on BTS NFTs], who will follow the government’s policy if it wants to tax only other virtual assets?”
- The country’s finance minister Hong Nam-ki spoke earlier this month on the topic, acknowledging that NFTs will not be taxed from next year, as they are not categorized as virtual assets under the income tax law. Hong did mention that there will be further discussions on the matter. Be that as it may, the minister reiterated that day the tax on cryptocurrency gains will take place as scheduled.
- South Korea’s amended tax law stipulates that crypto income over the amount of 2.5 million won (about US$2,132) be taxed at 20% starting Jan. 1, 2022. Its announcement sparked immediate controversy, with crypto investors arguing it was unfair. While crypto income is taxed over 2.5 million won, stock capital gains taxes start at 50 million won (around US$42,600), starting Jan. 1, 2023.
- There are other existing loopholes in the tax plan, including the fact that it is almost impossible to track down peer-to-peer (P2P) transactions. “When it can’t even tax P2P transactions and only tax virtual asset trade on exchanges, I think surely the amount of transactions through the exchanges will shrink,” said Oh Moon-sung, professor of tax accounting at Hanyang Women’s University, in an interview with Forkast.News. He added that no rational investor will keep using exchanges when in P2P transactions, they do not need to pay taxes. Oh suggested the government implement the tax law on crypto gains when there are no longer loopholes in the system.