The tax authorities in South Korea stated that donations and inheritances in crypto tokens are soon going to be subject to taxation. Citizens that obtain crypto assets without investing in them will have to pay taxes in the state fiat currency. The new bill takes effect this month.
Additionally, more rigorous monitoring of tax compliance is announced for the crypto market in 2022.
A few months ago, Parliament stopped a bill on crypto trading. Both ruling and opposition parties agreed to allow tax-free trade with crypto assets until the end of 2023. Therefore, the fact that citizens will be obliged to pay taxes on any donated crypto assets, came somewhat unexpected.
The tax payment procedure will be facilitated by a special tool that will be added to the NTS (National Tax Service) website, allowing citizens to estimate the amount they are supposed to pay. The widget will use data from the largest and most reliable exchanges to estimate the counter value in South Korean fiat currency.
The exact tax amount will be calculated based on the two-month average price, rather than the value at the time of donation. Due to the volatile nature of crypto assets, such regulation seeks to prevent canny investors from making gifts at times when prices drop, thus avoiding potentially substantial taxes in the future.
The taxation authority is yet to define which period of time the two-month average refers to. Most probably, however, it will take into consideration the period of one month before and after the donation.
Additionally, Seoul announced draconian measures for individuals involved in high-level frauds with crypto assets. For example, a legislative proposal was presented introducing life sentences for proven manipulations with token prices.
In order to implement more strict control over the crypto market, many state bodies join forces. A few days ago, the NTS held a joint meeting with several governmental bodies, with the purpose to check the suspicious virtual asset service providers (VASP) and assess if they comply with the newest Virtual Asset Industry Act.
The conclusion of the meeting was that further regulation of the market is necessary, as well as tracking and punishing the unethical VASPs, for the benefit of all. The government stated that the strict legislation and decisive implementation are a response to unfair trade practices within the industry.