Despite being decentralized, cryptocurrency users continue to be subject to varying taxation regulations based on their location. Over the course of the past few months, a number of tax agencies around the globe have been in the process of creating new guidance frameworks for overseeing their respective crypto industries.
South Korea has definitely been quite active in this regard over the past few months, with the Ministry of Economy and Finance seeking to derive financial benefit by taxing cryptocurrencies.
No more speculation
A recent report from local media outlet News Asia states that the South Korean government has decided to tax cryptocurrency trading, starting 2021.
There has been an on-going debate between the regulators and the businesses over whether income from transactions would be viewed as transferable income, such as with stocks and real estate, or as other/miscellaneous income like in the case of interest, dividends, and lottery winnings.
The Ministry of Strategy and Finance had the final say in how cryptocurrency trading would be taxed and it came down to capital gains, the taxation scheme adopted by the United States. This scheme was argued upon earlier this year since income from cryptocurrency should be regarded as income from a rise in capital.
The nation has been considering taxing crypto ever since a Joint Task Force (TF) was formed following the massive bull run of 2017.
Back in September 2019, the International Accounting Standards Board (IFRS) said that cryptocurrencies should be classified as an asset and not a currency. This gave those on the side of asset classification a much sharper edge in the then on-going discussion.
However, some argue that a lower transaction tax must be introduced rather than a capital gain tax. This is the same category under which securities are classified in Korea.
The start of 2020 saw various speculations regarding the South Korean authorities and their plan on taxing cryptocurrencies. The Daily Chain had reported that the Ministry of Economy and Finance was considering imposing a 20% tax on crypto-based income.
The recent decision to tax crypto would clarify further confusion and speculation regarding how the regulators plan on addressing the crypto situation. The next important thing in line is vigilant reporting of transaction details.
An unnamed official at the Ministry of Information and Technology suggested that:
“In terms of the convenience of taxpayers’ reporting, it would be better to give the exchanges the responsibility to report transactions.”
With this move, crypto exchanges in the nation would be providing detailed information regarding a customer’s trading activities, reducing the risks of illegal activities like money laundering. Thus, a solid regulatory framework and new tax laws further improve the legal standard of the crypto industry in the nation.
The move is also being praised by traders and investors in the nation. One local investor added:
“It looks like from next year, we will see larger institutions being able to actually engage in crypto activities legally.”
It must be noted that South Korea’s crypto regulations have been largely boosted by Park Yong-jin, a member of the National Policy Committee from the ruling Democratic Party. Jin introduced the first-ever taxation policy in 2017 which laid the foundation for future regulations.