South Korean authorities have announced a new cryptocurrency tax scheme that targets overseas digital assets holdings.
According to the country’s National Tax Service, starting 2022, residents with foreign crypto exchange accounts may be compelled to report the holdings for balances exceeding $447,900 (500 million won).
The new law comes into effect on January 1, 2022, but the tax reporting will begin in June 2023. Failure to report the crypto holding attracts a fine of between 10-20% of the amount not reported or unreported.
Additionally, authorities might open criminal proceedings if the underreported amount is over $4.47 million (5 billion won).
South Korea’s road to crypto taxation
New tax laws in Korea have been under work for months despite protests from the country’s crypto community. The initial plan to tax crypto assets was made early this year.
Furthermore, the government recently announced that starting next year, non-sales transfers of crypto asset ownership will be subject to statutory gift and inheritance tax rates of up to 50%.
According to the country’s finance minister, Hong Nam-ki, cryptocurrencies cannot be classified as currency because they attract profit.
“When capital gains are generated from transactions of virtual assets, we cannot help imposing the tax to promote taxation equality,” Hong said.
With new changes, cryptocurrency gains are now classified under miscellaneous income.
South Korea’s new crypto tax regulation comes even as other jurisdictions move to clarify their position on digital assets. For example, in China, the government has announced a crackdown on cryptocurrencies citing a threat to financial stability.