Taxation Authorities in South Korea are bent upon imposing taxes upon South Korean crypto holders. Whether the digital assets are maintained and held within or outside South Korea, the taxpayer is liable to pay taxes if the person is a South Korean national or residing temporarily in the country.
Though the South Korean Government lends support to the crypto industry yet, some of its initiatives have been questioned lately.
The most apparently questionable initiative was of amended the taxation laws.
By amended the tax laws, the South Korean Government, through the tax authorities have introduced laws relating to crypto. As per the changes, the Taxation Authorities have imposed tax liability upon the taxpayers who own and possess digital assets or cryptocurrencies.
The initial intent of the law was to make it applicable to the South Korean taxpayers. However, the law was extended to include locally operating crypto trading platforms as well. Approximately, 20% of new taxes have been imposed upon crypto owners and crypto trading platforms. However, the tax will become applicable if the annual income of the taxpayer is over and above US$ 2,300. This meant that those persons whose annual income is below this threshold, wouldn’t be required to any pay taxes towards crypto ownership.
But even in this scenario, the imposition of conditional tax was not acceptable to South Koreans especially the youth. After promulgating the law, the Government also explained that crypto trading is not safe and not everyone is equipped to do it safely. However, there is a potential danger that the South Korean youth is exposed to this risky form of trading, claimed the Government. Therefore, it was necessary to implement bylaws that can ensure the youth from taking any financial harm, clarified the Government.
However, the sentiments of the younger lot were hurt badly and they showed their discontent over the Government’s initiative. It was noted by the Government that the majority of crypto traders in South Korea are nationals who are under age. So the law was promulgated to safeguard youth’s interests.
Apparently now the South Korean Government has further clarified the law. It told that the law is applicable to those taxpayers also who are dealing with offshore crypto trading platforms. For instance, South Korean taxpayers will be entitled to pay crypto taxes even if the assets are held by a foreign entity. This type of tax has been collected under the head of “profit gains” which is also widely known as “capital gain tax”.
The South Korean Tax Authorities have informed that capital gain tax will be collected from January 1st, 2022.
According to many South Korean tax experts, this tax collection is illegal. They are claiming that such tax can be treated as “double taxation” which is barred by global taxation laws as well.