A new crypto tax is under consideration in South Korea. According to the local newspaper Pulse, the South Korean government would like to change the way crypto trading earnings are currently classified.
Currently, these are considered as capital gains, while the hypothesis being examined is to classify them as “other income”, such as winning prizes or lotteries, which in South Korea are taxed at 20%.
The department of income tax of the South Korean Ministry of Economy and Finance, which oversees the taxation of income such as income from work or life annuities, is reviewing the taxation of profits from the transaction of virtual assets, the monitoring of which was previously assigned to the department of property tax, which oversees the taxation of, for example, capital gains and donations.
It is precisely this change that raises the suspicion that the government intends to change the classification of profits on cryptocurrency trading. This intention was also confirmed by a government official, who stated:
“The Finance Ministry is yet to finalize its direction but it surely has become more likely for the income from virtual asset trading to be labeled as other income, not as gains from transfer of capitals like real estate properties”.
In addition, the country’s tax authority has already begun to consider the profits collected by foreigners as other income when it comes to cryptocurrency trading, collecting duties directly from crypto exchanges. As such, the measure appears to be about to become effective in the near future.
When the change of classification is approved, the change in the tax regime on crypto trading profits will immediately take effect in the country.
South Korea is by far one of the countries in the world with the highest per capita cryptocurrency trading volumes, and this decision might also set a new standard.
It is by no means unlikely that, once this measure comes into effect, other countries will follow South Korea’s example. In fact, there are many countries in which the taxation of profits on crypto trading is now applied as capital gains from the sale of capital, and if the South Korean measure is successful it is very likely that other parts of the world will also start thinking about adopting it.