South Korea proposes 20% cap. gains tax on cryptos

An amendment to the Income Tax law was proposed by a Democratic lawmaker today which would impose a 20% capital gains tax on cryptocurrencies in South Korea.

Democratic Party member Kyungsook Yang proposed the amendment to the Income Tax Law and listed the specific tax rate and categorization of cryptocurrencies. Yang commented that although cryptocurrency resembles both currency and assets, they are only recognized as assets by the state.

National Assembly tacitly committed to applying capital gains tax on cryptocurrency trades about a month ago. The proposed amendment solidifies that commitment by detailing the specific rate at which the virtual assets would be taxed. This is an uncommon practice in developing a tax law in South Korea.

The amendment would make crypto trades made at a positive net gain a taxable event. As of now, tax law regarding cryptocurrency trades remains absent. Therefore, the new amendment must be added into the tax law officially before 2021 for any tax rate to be applied to crypto trades before then.

Under current tax law, capital gains arise from trading assets and derivatives such as land, real estate, and stocks. Last month, lawmakers intended to apply capital gains tax law to cryptocurrencies in a way that specifically resembles the tax law regarding real estate transactions.

Lawmakers generally agreed that a transfer tax should also be imposed on cryptocurrency but they balk at the idea of creating feasible legislation for it. It is very difficult, and in some cases impossible, to accurately calculate the acquisition price of a cryptocurrency when it is acquired through P2P transactions or as overseas remittances.

Reactions and Reasoning

Residents remain nonplussed in the least and mostly disappointed. Some have gone as far as to link the sudden interest in crypto tax law with the rise of Yeojung Kim’s (Kim Jongeun’s sister) appearance in power. More realistically, one resident notes that as lawmakers include more and more taxable events in the tax law, fewer and fewer may be reelected.

Since 2018, the government has been considering a taxation plan for cryptocurrencies by forming a Joint Task Force (TF). TF was essentially formed in the immediate wake of the 2017 crypto boom. In September of last year, the International Accounting Standards Board (IFRS) concluded that cryptocurrencies could be classified as an asset rather than as a currency which gave those on the side of asset classification a much sharper edge in the then-ongoing discussion. 

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