Crypto Tax Is On Hold, But Free Coins Are Taxable – South Korea

Crypto tax is on hold, but free coins are taxable in South Korea, as the country mulls over a “gift tax” for airdrops.

Despite the suspension of the cryptocurrency gains tax until 2025, the South Korean Ministry of Strategy and Finance announced on Monday that hard forked tokens, staking incentives, and airdrops of virtual assets will all be subject to gift taxes under the Inheritance and Gift Tax Act.

Under South Korean legislation, cryptocurrencies are formally classified as virtual assets.

Crypto Tax Is On Hold Untill 2025

The South Korean tax office stated in answer to a tax law query concerning transfers of virtual asset airdrops by crypto exchanges that any free virtual asset transfer by crypto exchanges in the form of airdrops, staking rewards, and hard-forked tokens would trigger a gift tax, meaning that free coins are taxable goods.

According to a local news outlet, the gift tax will be levied on the third person to whom the virtual asset is given free of charge.

Even if virtual asset gains tax will be implemented in 2025, free virtual asset transfers will still be subject to a 10-50% tax under the Inheritance and Gift Tax Act. The recipient of the free “present” must submit a gift tax return within three months of receiving it, according to the law.

However, given the absence of laws surrounding the virtual asset market, the ministry also stated that real taxation on such virtual asset transactions should be assessed on a case-by-case basis. According to a government statement:

“Whether a specific virtual asset transaction is subject to gift tax or not is a matter to be determined in consideration of the transaction situation, such as whether it is a consideration or whether actual property and profits are transferred.”

The authorities have postponed the virtual asset gains tax on many times due to a lack of regulatory rules. Examining all forms of virtual asset transactions and forming a legal framework around them becomes rather complicated for them. As a result, even when taxes are assessed, it is impossible to understand the details of virtual asset contributions.

South Korea Crypto Tax – Overview

Lawmakers in South Korea discussed a 20% capital gains tax on crypto, when it was initially discussed and proposed that any yearly gains above 2.5 million won ($2,200) would be subject to the tax from October 2020. Later that year the government of South Korea postponed the new tax regime until 2022, because of major criticism and pushback from the local crypto lobbyists.

A couple of months after the election of the new president – Yoon Suk-yeol, the law was deferred for two more years, until 2025.

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