South Korea Plans To Regulate Crypto Airdrops With 10%-50% Gift Tax

22 Aug 2022

South Korea Plans To Regulate Crypto Airdrops With 10%-50% Gift Tax

South Korea Plans To Regulate Crypto Airdrops With 10%-50% Gift TaxSouth Korea’s Ministry of Strategy and Finance has issued a statement announcing that virtual asset airdrops can also be subject to the gift tax.According to the interpretation of the Ministry of Finance’s tax law, based on individual cases, gift tax will be applied to free virtual assets when the property value is paid out.The matter came to light as the government was responding to a tax law interpretation inquiry on whether a transaction, in which a virtual asset issuer provides a virtual asset of the same or a different kind to a member who owns a specific virtual asset is a transaction, subject to the gift tax. "In this case, a gift tax will be levied on the third party who receives the virtual asset for free," the ministry said, since the free transfer of assets is a ‘gift’ under the Inheritance and Gift Tax Act.Government Specifies What Is Free Virtual Asset TransactionsTo clarify what would fall under free virtual asset transactions, the ministry said, "free virtual asset transactions include airdrops – that pay new virtual assets to those who own specific virtual assets according to the investment ratio, hard forks – that create other virtual assets through a new blockchain and deposit virtual assets in a blockchain network." It added, "There is staking in which virtual assets are paid as a reward."Giving an example, the ministry said, "if a virtual asset investor receives a virtual asset payment as an airdrop reward from an exchange, this means that the investor may be subject to the gift tax."Capital Gains From Virtual Assets Will Begin In 2025Though the gift of virtual assets is still being taxed, The tax authorities of Korea revealed that "taxation on capital gains from virtual assets will begin in 2025." This is because gift tax is comprehensively levied on all objects of economic value that can be converted into money, or on all legal and de facto rights that have economic benefits and property values.An official from the tax industry said, "In the case of a free gift of virtual assets, the principle is, of course, the subject of taxation," clarifying that a person obligated to pay gift tax must file a gift tax return within three months from the end of the month in which the gift date belongs, and the tax is levied at a rate of 10-50%.However, the Ministry of Strategy and Finance contradicted the tax authorities and said, "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."According to the ministry, the government’s position is that the actual taxation of gift tax should be considered on a case-by-case basis.On the FlipsideKorea’s Ministry of Strategy and Finance thinks that the taxation of virtual assets will not be easy since it is a problem that it is difficult for the tax authorities to grasp the details of virtual asset donations, even when taxes are levied. According to them, "in virtual asset transactions, there are many new types of transactions that do not have a legal basis, and the related infrastructure is insufficient."Why You Should CareSouth Korea is actively finding ways to regulate crypto and incorporate the use of crypto in daily life.Similar stories on DailyCoin:Korean Police Ready to Accept Crypto for Traffic FinesContinue reading on DailyCoin

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