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South Korea has amended its law to charge a 20% tax on crypto earnings above 2.5 million KRW. The tax amendments should be approved by the parliament.
The Republic of South Korea has finalized plans to charge a 20% fee on earnings accrued on crypto trading as of October 2021. The move comes after months of debate in which the Asian giant tried to take a position on taxation policies related to cryptocurrencies. The subject of tax regulation in the crypto space has generated a lot of polarizing situations all over the world.
As the highly cryptographic nature of the cryptocurrencies will not permit the direct levy of taxes on individual holders, a grip on crypto businesses has been heralded as a viable way for the government to take tax gains in the industry. As generally observed, countries with no accommodating laws or models to charge profit directly from crypto-based businesses are quite hostile as popularly showcased by India.
The South Korean Tax Revision on cryptocurrencies will be applicable to all annual income above 2.5 million won (around $2,000) obtained from crypto trading or liquidation will be taxed at 20 percent, while any amount less than that will not attract any taxation.
Justifying South Korea Bid to Levy Taxes on Crypto Earnings
South Korea is a hub for some of the world’s renowned technology companies including Samsung Electronics Co Ltd (KRX: 005930), and the country has become a hub to blockchain technology and its associated innovations, chief of which is digital currencies. South Korea has attracted numerous cryptocurrency exchanges including Bithumb, Upbit, Coinone, Korbit, etc.
Transactions resulting from these exchanges are growing by the day showing how much cryptocurrencies have integrated into the South Korean economy. Back in 2018, the total revenue earned by 30 of South Korea’s cryptocurrency exchanges increased by 87.5% more than the previous years. As noted by bitcoin.com, Yonhap news agency wrote:
“According to the data released by Rep. Park Kwang-on of the ruling Democratic Party, accumulated commission-related sales of some 30 cryptocurrency exchange operators are presumed to have reached 700 billion won [~USD$658 million] as of the end of last year, compared with an estimated amount of 8 billion won as of the end of 2016.”
The growing revenue accruing from cryptocurrency exchanges must have prompted the South Korean government to shine its radar on the cryptocurrency ecosystem thus prompting the proposed tax amendment.
Amendments to Be Approved by Parliament
The proposed tax amendments will be forwarded to the South Korean parliament for approval before becoming a law. As a result, the ministry will submit it with the National Assembly before September 3. The tax proposal is expected to meet no further opposition as the debate over the tax laws has been on for a while.
Different South Korean ministries have dissenting views on which position to take on the tax proposals. Before now, there are agencies in South Korea who wanted tax exemptions for crypto-firms while others believe crypto earnings can be captured as an alternative earning source which is liable for being taxed. The debate of taxing crypto in South Korea also ignited back in late 2019 as the country’s tax authority slammed a $69 million fine on Bithumb, one of South Korea’s leading crypto exchanges, as withholding taxes.
With all finalized with the country’s apex tax authority, the amendments if passed by the parliament will come into effect on October 1, 2021.