The government of South Korea has made it official that crypto profits are not taxable according to the country’s current tax law. The decision comes only less than a month after the country announced that it would levy taxes on profits derived from crypto assets.
Crypto Profits Not Taxable in South Korea
Through its Ministry of Economy and Finance, which supervises the country’s economic policy, South Korea revealed that profits derived from crypto trading are not subject to taxation according to the current tax law. However, it was quick to note that it’s evaluating taxation trends in other countries across the world to inform appropriate amendments to the existing law.
Currently, South Korea does not levy taxes on all profits derived from financial investments. Consequently, the country cannot impose taxes on profits from investments that are not clearly defined under the tax law. In its current form, the term “cryptocurrency,” or its related synonyms, does not feature anywhere in the tax law.
According to clarification made on December 30, 2019, the ministry said:
“Profits from individual virtual asset transactions are not listed income and are not taxable.”
Change of Plan
The confirmation, however, seems to be a U-turn from an earlier decision. In earlier December 2019, the Korea Times reported that the government of South Korea planned to start taxing crypto-related gains.
According to an unidentified ministry official, the government was having discussions to revise the bill and draw it within the first half of 2020.
The ministry is pushing to revise the section of the tax law, which currently exempts crypto assets from taxation.
“We are preparing a taxation plan for virtual assets by comprehensively reviewing the taxation of major countries, consistency with accounting standards, and trends in international discussions to prevent money laundering,” the ministry said.
All the same, the government must make some major decisions before the amendment becomes effective. The government has to clearly define cryptocurrency and determine whether crypto profits should fall under capital gains. Besides, there should be proper mechanisms in place to feed the government with trading records from crypto exchanges.
Overall, cryptocurrency must acquire a legal status before the government can add it to its legal system. Based on the anonymous feature of cryptocurrencies, it remains a wait-and-see scenario as to whether the National Tax Service (NTS) would be able to get details of every crypto transaction.
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