The South Korean Ministry of Economy and Finance has confirmed that under current tax laws, profit generated from cryptocurrency transactions are not taxable. At the same time, the government also noted that they are reviewing crypto trends and tax laws around the world to incorporate cryptocurrencies under tax laws. The current tax laws do not levy a tax on every monetary gain and given the income from cryptocurrencies are not defined under the current tax laws; thus, it is not taxable.
One of the officials from the South Korean Ministry of Economy and Finance said that the ministry is already working on a revised bill which might see a draft version ready by the first half of 2020. The process might be daunting as crypto is yet to get legal status. The ministry would need to asses whether profits can be deemed as capital gains. Then they would also require cooperation from exchanges to get a complete trading analysis to levy taxes on these traders. The ministry noted,
“We are preparing a taxation plan for virtual assets by comprehensively reviewing the taxation of major countries, consistency with accounting standards, and trends in international discussions to prevent money laundering.”
Native Tax Laws V/S Foreign Tax Laws
Although there are no taxes on profits made from cryptocurrencies locally, the National Tax Service (NTS) does consider gains made by foreign traders as miscellaneous income which falls under the same category as winning a lottery. On the other hand, benefits from the trade market and real estate are categorised as capital gains. One of the tax professors in the country noted that the NTS decision to categorize foreign traders crypto profits under miscellaneous benefits was understandable given it would have required authorities to get all the transactions details from an exchange which would have been difficult.
South Korea is known as a tech-savvy nation and was among the earliest to legalize crypto trading and blockchain implementation in several sectors. Last year South Korea also reviewed ICOs amid a growing number of scams and decided to ban ICOs in the country after a full inspection. The upcoming tax laws surrounding cryptocurrencies would ensure better understanding among crypto traders as well as service providers on what form of taxes apply to their crypto offerings and profits.