In brief
- South Korea's Deputy Minister of Finance proposed a flat 20% tax on crypto-profits today.
- If the proposal passes in September, traders will be taxed from October 1, 2020.
- To date, crypto speculators have not paid any cut of their profits to the government.
Traders of Bitcoin and other cryptocurrencies will be taxed 20% on crypto-profits exceeding 2.5 million won ($2000) annually if a new tax proposal is passed in September, local news outlet Yonhap News reported Wednesday.
Deputy Prime Minister Hong Nam-ki announced the amendment at the Ministry of Strategy and Finance’s Tax Development Deliberation Committee, an event covering “virtual currencies” as part of a wider tax rollout in 2020.
Korea’s crypto capital gains tax
If passed in September, Korea’s crypto traders will pay a flat 20% tax on their profits. The development steps away from an earlier proposal—which called for taxing only crypto-fiat transactions, mining rewards and ICO returns.
The proposal puts Korea in line with the approach of other countries such as the US in considering crypto profits under “capital gains” ahead of “other income.”
South Korean lawmakers propose tax on crypto profits
South Koreans may soon find their crypto dealings at the mercy of the tax man. The South Korean Ministry of Strategy and Finance proposed a tax on profits made through crypto-fiat transactions earlier this week, including tokens sold by crypto mining organizations and through initial coin offerings (ICO). Regulators intend to release the full proposal in July and submit the tax amendment to the South Korean regular assembly in September, as reported by local South Korean news outlet Edaily. In...
With the global coronavirus pandemic crippling economic activity around the world, countries like South Korea are turning towards previously untapped avenues to jumpstart their economy.
"We tried to overcome the economic crisis early and secure new growth engines in the post-Corona era while strengthening taxation equilibrium and social solidarity,” said Hong in a pre-briefing.
Korean crypto markets and the "Kimchi premium"
The move follows months of parliamentary discussions (and some backlash) on levying a flat tax on crypto gains. To date, speculators have not paid any cut to the government—resulting in some particular characteristics of the Korean crypto market such as the “Kimchi premium.”
But not everyone is pleased. Back in June, an academic said the government’s consideration of a crypto-tax proposal was a “stumbling block.”
South Korea gives green light to crypto with new law
The National Assembly of South Korea’s legislation and judiciary committee has passed the “Special Financial Information Law”, a key piece of crypto legislation. The legislation, approved on March 5 following a delay caused by the coronavirus outbreak, significantly tightens quality control in the crypto industry, specifically around local crypto exchanges. It requires crypto exchanges to comply with the Financial Action Task Force’s (FATF) guidelines on anti-money laundering (AML) and terrori...
"The financial authorities should think twice before imposing taxes on the market, as the digital currency industry is still in its infancy," said Yonsei University economist Sung Tae-Yoon. "Any rash taxation or introduction of regulations can be a stumbling block for sustainable growth of the industry.”
For some in Korea, crypto-trading was a way towards a better life—but taxes could make that path rockier.
