South Korea has postponed its crypto gains tax on multiple occasions due to a lack of investor protection measures and regulatory guidelines.
The South Korean Ministry of Strategy and Finance on Monday cleared that virtual asset airdrops, staking rewards and hard forked tokens would be subject to a “gift tax” under the Inheritance and Gift Tax Act despite the postponement of crypto gains tax to 2025.
Cryptocurrencies are officially referred to as part of virtual assets under South Korean law.
In response to a tax law inquiry about transfers of virtual asset airdrops by crypto exchanges, the South Korean tax authority said that any free virtual asset transfer by crypto exchanges in the form of airdrops, staking rewards and hard-forked tokens would attract a gift tax.
The gift tax will be “levied on the third party to whom the virtual asset is transferred free of charge,” reported a local news publication.
The tax authority cleared that even though virtual asset gains tax would now be applicable from 2025, free virtual asset transfers would still attract a 10-50% tax under the Inheritance and Gift Tax Act. The said tax requires the recipient of the free ‘gift’ to file a gift tax return within three months of receiving it.
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However, the ministry also cleared that actual taxation on such virtual asset transfers should be considered on a case-to-case basis, given the lack of regulations around the virtual asset market. A statement from the ministry read:
“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 lack of regulatory guidelines has been responsible for the postponement of the virtual asset gains tax by the authorities on multiple occasions. It becomes quite complex for them to examine all types of virtual asset transactions and form a legal basis around them. Thus, making it difficult to grasp the details of virtual asset donations, even when taxes are levied.