South Korea To Impose Tax On Virtual Airdrops Under Gift Tax
- South Korean authorities are working on building a comprehensive set of regulations for the citizens according to reports from local media outlets.
- The Ministry of Strategy and Finance in South Korea has reportedly said it would impose a gift tax on investors receiving freely transferable digital assets at a rate of 10-50%.
With the massive crypto adoption in the nation, the South Korean authorities are working on building a comprehensive set of regulations for the citizens. The recent development by the government reportedly brings gift tax.
As per a local media report, the Ministry of Strategy and Finance in South Korea has reportedly said it would impose a gift tax on investors receiving freely transferable digital assets at a rate of 10-50%. Notably, even cryptocurrency airdrops would also reportedly be subject to the gift tax. As a result, investors who receive cryptocurrencies in gifts must submit a declaration form within three months.
On Monday, the Ministry disclosed that the government recently answered a question regarding the imposition of tax on transactions in which a virtual asset issuer gives a person who has a certain virtual asset, a virtual asset of the same or a different kind. According to the Inheritance and Gift Tax Act, the free transfer of assets qualifies as a “gift.”
“In this case, a gift tax will be levied on the third party to whom the virtual asset is transferred free of charge,”
it stated.
Airdrops, which distribute new virtual assets to holders of certain virtual assets based on their investment ratio, hard forks, which generate new virtual assets via new blockchains, and virtual asset deposits on blockchain networks are all examples of free virtual asset transactions. As a result, if a virtual asset investor gets a virtual asset payment as an airdrop incentive from an exchange, the investor would be liable for gift tax under the new tax rules.
The tax department state that while the transfer of virtual assets is still subject to taxation, the taxation of capital gains on virtual assets will start in 2025.
However, the Ministry believes that the gift tax imposition will still vary from person to person.
“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,”
it stated.
The infrastructure behind crypto transactions is insufficient, and there are several novel types of transactions that lack a legal basis, making taxation difficult. The controversial tax law in South Korea is taking years to get implemented, and as per the recent developments, it has been postponed to 2025.
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
