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According to the authority, the gift tax rate will depend on the case, and the range is between 10% to 50%.
The Ministry of Strategy and Finance in South Korea has announced that crypto airdrops will now be subject to the gift tax. The Ministry gave the update while responding to an inquiry about transfers of virtual asset airdrops by crypto exchanges. Free virtual asset transfer by crypto exchanges will begin to attract as high as 50% of gift tax. These free virtual asset transactions include airdrop, hard fork, and deposits of virtual assets in a blockchain network. Also, there is staking in which the reward is in the form of virtual assets. As such, an investor who receives a virtual asset payment as an airdrop reward from any exchange would be subject to gift tax in South Korea.
Authorities in South Korea to Impose Gift Tax on Crypto Airdrops
According to the authority, the gift tax rate will depend on the case, and the range is between 10% to 50%. A local news publication on the gift tax in South Korea stated that the government will levy it “on the third party to whom the virtual asset is transferred free of charge.” The free transfer of assets is a ‘gift’ under the Inheritance and Gift Tax Act.”
The latest update in South Korea is another bit of regulation in the country. The tax authorities had said that taxation on capital gains from virtual assets will begin in 2025. Regulation of crypto exchanges and other aspects of virtual assets are still in the works. As the country enacts the gift tax rule, there is a time limit for anyone under obligation to pay. In that case, individuals must file a gift tax return within three months, beginning from the end of the month of the gift date. The Ministry of Strategy and Finance commented on the latest move on gift tax in South Korea.
“Whether a specific virtual asset transaction is subject to gift tax or not is a matter to be determined in consideration of the transaction situation, such as whether it is a consideration or whether actual property and profits are transferred.”
South Korea’s Crypto Regulatory Crackdown
Before the move on gift tax, South Korea has been clamping down on illicit activities in the crypto space. Already, about 16 crypto platforms are under suspension amid the crackdown. At the same time, regulators claim that some platforms are yet to register domestically. Some of the exchanges are Bitglobal, KuCoin, and Phemex. South Korea is one of the countries that have expressed concern about the crash of the Terra project. Authorities in the country have intensified regulation to prevent a recurrence of the Terra crumble. Already, officials have identified 15 entities with connections with the Terra fall. The entities in question included seven crypto exchanges, including Bithumb, Coinoine, Korbit, and Upbit.