South Korean tax agency plans to start taxing cryptocurrency gifts and inherited tokens

South Korea’s taxation plan for the cryptocurrency field has been brewing for a long time.

According to the latest KBS report, the Korean tax agency plans to start taxing cryptocurrency gifts and inherited tokens. Although this sounds like a complicated method to pay taxes in a statutory form. The National Taxation Service (NTS), the country’s highest tax agency, announced that from January 2022, citizens will be obliged to pay taxes on cryptocurrencies that they donate or inherit from family members or acquaintances.

It is worth mentioning that in December of this year, South Korean legislators postponed the plan to tax virtual assets until 2023 at the National Assembly plenary session, which means that investors can conduct tax-free transactions until at least 2023. But this has not prevented South Korean tax authorities from preparing plans to tax cryptocurrency gifts and inherited tokens.

South Korea’s taxation plan, which is expected to begin in 2023, will impose a 20% tax on crypto gains of more than 2.5 million won (US$2,122) within a year.

In order to help taxpayers fulfill their new legal obligations for encrypted gifts and inheritance this time, the Korean tax agency announced that it will add a new tool to its website. The tool will allow individuals to calculate the amount of tax owed when they receive a windfall in cryptocurrency.

The tool will use price data provided by the “big four” crypto exchanges of Upbit, Bithumb, Korbit, and Coinone. However, citizens will be forced to use the tool to create a two-month average price instead of the crypto price used at the time of inheritance or token receipt. It seems that NTS seems to be worried about token price fluctuations and that savvy investors may seek gifts when prices fall to avoid potentially huge taxes. Although NTS did not specify the time period that the average price of these two months is expected to cover, the time period is likely to cover the month before the receipt and the subsequent 30-31 days.

It is worth noting that the South Korean government also hopes to combat crypto market manipulation. Last month, South Korean financial regulators have begun to legislate on virtual currencies. This is the first time a regulator has formalized cryptocurrency legislation. In the future, anyone who derives improper profits from cryptocurrency transactions by manipulating market prices or using undisclosed information is expected to face at least one year in prison and at least three times the fine. In addition, cryptocurrency issuers must disclose white papers, legal opinions and business reports to users, and any violations will result in criminal penalties.

The industry predicts that if the “Cryptocurrency Bill of Rights” is promulgated this time, virtual currencies will be included in the formal regulatory system like banking, insurance and other financial industries.

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