South Korea has become one of the largest markets for crypto trading. In 2018, the government was close to imposing a ban on crypto trading via exchanges. However, the community responded with a large-scale petition and authorities backed off.
Now, however, they are mulling over the idea of imposing a 20% income tax on gains from crypto trading by treating it in the same way they treat earnings from ‘winning the lottery’, as per South Korean media.
The Finance Ministry eyes laying its hand on crypto gains
As per Pulsenews, the department of income tax in the Finance Ministry in South Korea is considering imposing a 20% income tax on profits from transactions on crypto exchanges, including gifts made in crypto.
Since this income tax department deals with taxation on regular capital gains, such as earned income, experts now believe that authorities in South Korea now plan to view gains from crypto trading as something different from capital gains.
One of the ministry officials has stated:
“The Finance Ministry is yet to finalize its direction but it surely has become more likely for the income from virtual asset trading to be labeled as other income, not as gains from transfer of capitals like real estate properties.”
Are crypto profits to be labelled as ‘prize winnings’?
As soon as the ministry starts classifying crypto gains as ‘other income’ – i.e. prize winnings, lottery gains, honorarium income, etc – the local tax authority will immediately impose an income tax on profits from crypto trading, some experts believe.
This already applies to foreigners, as they have to pay a tax on profits from trading digital assets on crypto exchanges – the money is collected directly from the crypto trading platforms.
In November 2019, the local tax service insisted that the local crypto exchange giant Bithumb must pay $69.3 mln in taxes.
However, the exchange intends to make moves against this decision in court.