Korean crypto tax amendment sent for review

This afternoon saw the release of the official 2021 tax law amendment in South Korea which, among other things, details a plan for cryptocurrency tax starting October 2021. The proposal puts the cryptocurrency tax rate at 20% and classifies gains as ‘other income’.

Only those earning more than about $2,000 per year will be subject to this tax assuming it passes.

The details of the amendment are mostly in line with predictions made since the beginning of the year. Debate has been ongoing for years about how to tax cryptocurrency. It became a hot topic in National Assembly and among relevant ministries in the past few months starting shortly before the passing of the Special Reporting Act this March.

Unexpectedly, however, the proposal classifies cryptocurrency gains as other income which would put them under the income tax law. This diverges from the reports made over the past 2 months that capital gains tax law would apply to cryptocurrency.

Having the tax law come into effect in October 2021 means that the regulations laid out by the Special Reporting Act will be in full effect after the 6 month grace period and all exchanges and crypto-related companies will be required to be in full compliance of the new law.

Korean investors have reacted negatively to the proposal mainly due to the high rate and low minimum threshold. A petition to President Jaein Moon was proposed yesterday morning shortly after the leak. As of publishing time, 7,387 people have signed the petition.

Their argument is that stock market gains carry a minimum threshold of about $16.5k while the proposed minimum threshold for cryptocurrency trading is only about $2k. Furthermore, the stock market tax will be applied in 2023 whereas the crypto tax would start next year if passed.

The plea from investors is apparently not about whether they should pay taxes, but that the circumstances of the tax rate seem weighed heavily against them. As the petition states, “[Cryptocurrency investors are being discriminated against as if we are not Korean citizens.]”

Data Leak

The release of the proposal document comes amidst some controversy. The official document was leaked yesterday morning and reported on by some Korean media. It seems that the document was slated for release on the 22nd rather than yesterday.

A reporter from major news outlet Joongang Ilbo who attended the official press release regarding the tax amendment on the 20th explained that although an outline was available then, the full document should not have been. As a result, the reporter presumed that a public official may have begun distribution of the document.

This would not be the first time that embargoed information related to government policy on cryptocurrency and other matters has leaked. In late 2017, a leak occurred which dramatically affected the volatility on the cryptocurrency spot trading markets. The official press release regarding countermeasures to the volatile market was released four hours early through a chatroom run by the Korea Customs Service.

Regardless of the circumstances surrounding the alleged premature release of the document, South Korea needs cryptocurrency tax law. Companies, individuals, the tax service itself, and tax lawyers currently have a difficult time determining how to calculate taxes without proper guidelines.

Telegram Chat (partner) – https://t.me/cryptodakurobinhooders
email – hello@thenews.asia
Bitcoin donations appreciated- 1EH7PHMt8rDD8eM8sarTpP7BaqVN8DVi7P