South Korea: Cryptocurrency capital gains will be taxed at 20% next year

On April 27, South Korean Finance Minister Hong Nam-ki said that South Korea will still tax capital gains on cryptocurrencies as scheduled next year, despite growing calls from investors to postpone the taxation, Yonhap News Agency reported.

"When virtual asset transactions generate capital gains, we have to impose taxes in order to promote tax equality," he said.

The South Korean government plans to impose a 20% tax on capital gains from virtual asset transactions starting next year, according to reports. Investors in Bitcoin and other cryptocurrencies have been calling on the South Korean government to apply the same tax standards to cryptocurrencies as to stock transactions during the surge in cryptocurrency prices. Currently, stock and fund investors in South Korea only pay tax on capital gains of more than 50 million won (45,000 U.S. dollars).

As early as January 2020, according to the Korea Times, South Korea began planning to impose a 20% tax on cryptocurrency capital gains, citing anonymous sources as saying that South Korea may reclassify cryptocurrency gains as "other income," grouping them with lottery gains rather than as a form of capital gains.

On July 22, 2020, Reuters reported that the South Korean Ministry of Finance announced a tax law revision plan. Starting from October 2021, local taxpayers who earn more than 2.5 million won from cryptocurrency transactions will be subject to a 20% capital gains tax. However, the taxation start time is slightly different from that reported by Yonhap News Agency.

Yonhap News Agency reported that under South Korean tax law, South Korea taxes all profits from intangible assets, including trademark rights. According to global accounting rules, crypto assets are classified as intangible assets or inventory. Hong Nam-ki reiterated that cryptocurrencies are virtual assets with no intrinsic value, "Crypto assets are subject to high price volatility and investment risks. Investors should be aware that they may suffer extremely high losses compared to other investment assets."

In addition to taxation, the South Korean government has launched a full-scale crackdown on any illegal activities involving cryptocurrencies, such as money laundering.

In fact, under the current Bitcoin bull market, countries such as India and Türkiye have also begun to strictly regulate cryptocurrencies such as Bitcoin.

On March 15, Reuters reported that a senior Indian government official revealed that India will propose a bill to ban cryptocurrencies and impose fines on everyone who trades or even holds such digital assets in the country.

The person said the bill may make the possession, issuance, mining, trading and transfer of crypto assets a crime, becoming one of the strictest cryptocurrency policies in the world.

According to Reuters on April 16, the Turkish Central Bank banned the public from using cryptocurrencies and crypto assets to buy and trade, citing the possibility of "irreparable" losses and transaction risks. In the legislation published in the local government gazette, the Turkish Central Bank stated that cryptocurrencies and other digital assets based on distributed ledger technology cannot be used directly or indirectly to pay for goods and services, and the legislation will take effect on April 30.