South Korea considering the imposition of 20% tax on crypto-profits

South Korea’s finance ministry might be planning to impose a 20 percent tax on income gained from cryptocurrency transactions, according to a recent Korea Herald report. The report quoted a government official as saying that while the finance ministry has not finalized its plan to tax cryptocurrencies yet, there is a possibility that the government might impose a 20 percent tax on cryptocurrencies.

According to the same, South Korea’s Ministry of Economy and Finance, after having recently reviewed the country’s tax plan, has now ordered the country’s income tax officials to carry out a review of the taxation plan for cryptocurrencies.

Such a development suggests that the government might categorize profits from cryptocurrency trading as ‘other income,’ and not as ‘capital gains.’ If finalized as ‘other income,’ the Korean tax authority, the National Tax Service (NTS), would be able to tax crypto-gains. However, this isn’t the first time South Korea has considered plans for taxing crypto-gains.

The official said,

“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.”

The NTS has already initiated the process of labeling gains earned by foreigners from crypto-trading as ‘other income’ and has also collected taxes indirectly through crypto-exchanges. Previously in December 2019, Bithumb, one of South Korea’s leading crypto-exchanges, was hit by a $70 million tax bill for withholding taxes on trading activities by foreign customers. At the moment, Bithumb is fighting to nullify the tax bill presented to it.

This development is more evidence of the government’s pro-active involvement in the digital assets industry. Just two weeks ago, the South Korean Presidential Office’s 4th Industrial Revolution Commission recommended allowing financial institutions in the country to launch cryptocurrency-related services like Bitcoin derivatives in the country.