The South Korean government has decided to tax profits on cryptocurrency trading, which could take effect from 2021.
Capital Gains Tax on Crypto Trading
According to a report,cryptocurrency traders in South Korea could be taxed capital gains on their crypto trading activities come 2021. This decision was made by the Ministry of Strategy and Finance after several deliberations.
The plan to tax crypto trading has been under consideration by the South Korean government. At the beginning of 2020, there were reports that the government was considering implementing a 20 percent crypto taxation on gains gotten from crypto trading and transactions. Later in May, the Ministry of Strategy and Finance also proposed imposing a tax on profits gotten from crypto transactions.
In a bid to bring more clarity to the country’s digital currency trading space, the South Korean financial regulator has floated the idea of taxing profits made on digital currency transactions. Notably, the tax will also be levied on digital tokens sold by crypto mining firms and via initial coin offerings (ICOs).
Per sources close to the matter, South Korean regulators are eyeing a July release for the full proposal, followed by the submission of the tax amendment to the South Korean regular assembly in September.
It’s worth highlighting that unlike the vast majority of other countries that levy taxes on profits made via digital currency trading, South Korea doesn’t tax crypto gains.
With the decision to tax crypto trading, a decision on the burden of reporting is now the next item on the agenda. According to an insider at South Korea’s Ministry of Information and Technology:
“In terms of the convenience of taxpayers’ reporting, it would be better to give the exchanges the responsibility to report transactions.”
With such a framework in place, crypto exchanges in the country will furnish South Korea’s tax agency with detailed information on its customer’s trading activities. Given the use of real-name accounts, capital gains tax will serve to improve the legal standing of the industry.
Some industry participants are already praising the move stating that it will serve to legalize South Korea’s crypto space. Speaking to News Asia, one local cryptocurrency investor quipped:
“It looks like from next year, we will see larger institutions being able to actually engage in crypto activities legally.”
What Next for Crypto and Blockchain in South Korea
South Korea’s crypto space has been through ups and downs, moving from a burgeoning market to coming on the brink of a total shutdown amid tightening government regulations.
The country’s Presidential Committee on the Fourth Industrial Revolution (PCFIR) earlier called on the South Korean government to introduce robust cryptocurrency regulations. These regulations will help to encourage crypto mainstream adoption. In March 2020, the South Korean National Assembly passed a bill that made bitcoin and crypto trading legal in the country.
On the blockchain side, the country has been making efforts to revamp the digital technology sector. Back in September 2019, South Korea’s blockchain sector was experiencing a decline as a result of stringent regulations. However, things could be changing for the digital industry as the government of South Korea is considering investing $400 million in blockchain research and development (R&D).