South Korean crypto traders may see their profits slashed by the tax man, soon.
According to the Pulse, South Korea’s government may classify gains from crypto trading as “other income,” making them subject to a 20% tax.
Prize winnings, honorarium incomes, and other significant – but unfrequent – returns fall under other income in South Korea. Other income is subject to 20% tax on 40% of total other income. The remaining 60%, however, is tax deductible.
Once labeled as other income, the Korean tax bureau will be allowed to impose tax on gains from virtual asset trading immediately. To tax as capital gains, in contrast, the government must receive information of virtual asset trading from cryptocurrency exchanges to obtain grounds for taxation on the gains and it should calculate fair market price. The revision of the related law is currently under review at National Assembly as the country is seeking to reform related law to tax cryptocurrency gains this year.
Korea’s tax authorities have already labeled foreigners’ cryptocurrency trading gains as other income, collecting the duties secondhand through cryptocurrency exchanges.
Local laws require the income payer to withhold taxes on any income made by foreign residents from selling assets in Korea.
Bithumb Korea, por ejemplo, has been slapped with a nearly $70 million tax bill after it had allegedly failed to withhold taxes of foreign customers.
The country’s largest crypto exchange, however, plans to take a tax bill to court.
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