On Thursday, South Korean Finance Minister and Deputy Prime Minister, Hong Nam-ki, said that the country will be moving ahead with plans to tax cryptocurrency gains. The new 20% tax will start in 2022 and NFTs will be exempt. This is all according to a report that was released in the Korea Times.
The new policy will issue a 20% tax on crypto trading gains that exceed 2.5 million won ($2,100 USD) made in a 1 year period. The plan was originally supposed to take effect on October 1 but has been delayed due to a lack of taxation infrastructure.
In September, the ruling Democratic Party of South Korea proposed to delay the taxation until 2023. This proposal was abandoned. At the parliamentary audit of the Ministry of Economy and Finance in Soel on Wednesday, Hong said, “Any further delay in the already postponed enforcement will lead to the loss of public trust in government policy and undermine stability in the legal system.”
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NFTs seem to be exempt from the crypto tax for now because South Korea does not currently classify them as “virtual assets.” All existing cryptocurrency exchanges in South Korea were required to register with local authorities by Sept 24 or suspend their operations.
The new crypto tax has been put into effect due to the sudden explosion of the South Korean cryptocurrency market. The crypto market now rivals the nation’s stock market so many believe that now is the right time to introduce taxation.
Crypto exchanges in South Korea were required to register with local authorities so that cryptocurrency can be easily tracked in the country. The new rules have forced dozens of exchanges to shut down in recent weeks, with just four completing the registration process.
The new tax regulations will commence on January 1, 2022. NFTs are currently excluded from tax, despite becoming one of cryptos most talked-about technologies. The sales volume of NFTs expanded to $10.7 billion in the third quarter of 2021, most of it was transacted to Ethereum.