South Korea may reveal new rules on crypto tax by July

The government is allegedly considering a 20 percent tax on crypto income

South Korean flag
While South Korea is a hot hub for cryptocurrencies, the government has taken a laid-back approach to interfering or regulating in such activities.

South Korea is almost ready to announce the final details of its policy for taxing income generated from cryptocurrency transactions. Discussions are coming to a close after years of back and forth about virtual assets, which currently remain in a legal grey area.

According to South Korean outlet Yonhap News, the Minister of Finance, Hong Nam-ki, assured that his ministry will announce the details next month.

In his speech to the parliamentary finance committee, Nam-ki explained that the government is continuing to work on the local tax system.

“The government has continued to realign its tax system to reflect changes in market conditions, but it is especially working to refine its list of taxable items and types of tax this year.” Nam-ki said.

Nam-ki revealed that he personally believes that a digital tax needs to be introduced to the tax system, and that the government as a whole is considering a move in that direction.

Many believe that the South Korean Government is considering the imposition of a 20 percent tax on all crypto income. While no specific taxation standards for crypto assets have been set in place yet, the finance ministry was reportedly thinking of res-classifying returns made on cryptocurrencies as a form of “other income.”

This places crypto profits in the same category as other profits earned from lotteries, also with a 20 percent tax rate.

There is a high tax tag levied on “other income”, however it remains better than being taxed as a form of capital gains, as it is currently treated. This calls for rates that can rise up to 42 percent.

Historically, South Korea is one of the world’s hottest investing and trading markets for cryptocurrencies. However, authorities have had second thoughts about more tightly regulating the virtual asset class as it could lend legitimacy to the sector.

The central bank has preferred to instead take a “wait and see” approach when it comes to issuing a government-controlled cryptocurrency, more commonly referred to as a central bank digital currency (CBDC).

Earlier this month, the South Korean central bank appointed a legal advisory group to study the possibility of launching a CBDC. The team is composed of six people; three professors, two lawyers and one official from the Bank of Korea.

While the central bank did not stipulate any hard guidelines or set any specific deadlines for the launch of the CBDC, the panel may operate until May 2021.

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