South Korea postpones crypto taxation plan to 2023
The planned taxation on digital assets gains in South Korea has been delayed by the country’s legislative body.
Representatives from the Tax Subcommittee in the National Assembly agreed to postpone the crypto tax by one year. A 20% tax on gains made through cryptocurrency trading – if the total income is more than 2.5 million Korean won (about $2,000) – was originally set to come into effect next month. If the amendment passes a parliamentary vote, the new taxation rules would come into play on January 1, 2023.
“There is an inconsistent system for imposing taxes without a clear basis on how to legally define cryptocurrencies in our system… but only in Korea does taxation come before regulation,” said Representative Kim Young-jin, Chairman of the Tax Subcommittee.
Although no specific taxation standards for crypto assets have been put in place yet, the finance ministry considers re-classifying returns made on cryptocurrencies as a type of ‘other income’. This places crypto profits in the same category as those earned from lotteries, which has a 20 percent tax rate.
Despite the high tax tag levied on ‘other income’, it remains better than being taxed as a form of capital gains as it is currently treated, which calls rates of up to 42 percent.
Historically, South Korea is one of the hottest investing and trading markets for cryptocurrencies. However, authorities have been hesitant to regulate the virtual asset class, due to their belief that cryptocurrency regulation could lend legitimacy to the sector.
Separately, the central bank is taking a ‘wait-and-see’ approach over the issue of a government-controlled cryptocurrency, or a so-called central bank digital currency (CBDC), as of now.
A few crypto exchanges met registration deadline
Only 29 cryptocurrency exchanges in South Korea filed with the nation’s regulators to continue their businesses in the country. Out of this figure, the local industry media have identified the four biggest crypto exchanges – UPbit, Bithumb, Coinone and Korbit.
These platforms — who are collectively referred to as “The Big Four” — are responsible for more than 90% of the crypto trading volumes in South Korea.
Upon completing real-name verification and partnering with a local bank, digital assets platforms are required to acquire a license from the country’s Financial Intelligence Unit (FIU). This is a unit of the Financial Services Commission (FSC), the country’s top financial regulator.
The deadline for acquiring the license had already expired in September, meaning that those who didn’t submit their applications will have to shut down in part or completely.