The Ministry of Strategy and Finance of South Korea has announced that crypto airdrops, staking rewards and hard-forked tokens will be subject to gift tax under the nation’s Inheritance and Gift Tax Act.
Amid the postponement of crypto gains tax to 2025, cryptocurrencies have officially been deemed as part of virtual assets under South Korean law. In response to a tax inquiry about transfers of virtual asset airdrops by exchanges, the South Koreas tax authority has said that any free virtual asset transfers in the form of airdrops, staking rewards and hard-forked tokens would now attract a gift tax. According to local news publication Yonhap News, gift tax will be:
Levied on the third party to whom the virtual asset is transferred free of charge.
The tax authority said that although virtual asset gains tax would now be postponed to 2025, free virtual asset transfers would attract a 10-50% tax under the Inheritance and Gift Tax Act. Under the Act, once a recipient receives a free “gift,” they will be required to file a gift tax return within three months of receiving it. Given the lack of regulations surrounding the virtual asset market, the ministry said that actual taxation on such virtual asset transfers will be considered on a case-to-case basis. The ministry adds:
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 proper regulatory guidelines surrounding virtual assets has led to the postponement of the virtual asset gains tax. Initially scheduled to be implemented in 2023, the virtual asset gains tax will now only be introduced in 2025.
South Korea has taken numerous steps to crack down on illicit activity in the cryptocurrency market. Last week, the country moved to suspend sixteen crypto platforms, with regulators saying that some of these platforms have not undergone the necessary registration. The South Korean police force has also undertaken two pilot programs allowing it to seize cryptocurrencies for delinquent traffic fines.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.