The Korean Ministry of Economy and Finance announced an amendment to the law, which will legalize the trading of digital assets. They also contemplate a 20% tax on earnings from cryptocurrency trading.
In recent days, the Korean Ministry of Economy and Finance issued an amendment to the Act on Reporting and Use of Specific Financial Information. They legalized cryptocurrency trading and stated that there will be a 20% tax on earnings from cryptocurrency trading. Traders will have to pay this tax on any profits above 50 million won (KRW). However, any amount below that will not generate any tax payments for the moment.
The financial authority said that there will be a 25% increase in the tax rate in the case of earnings above KRW 300 million. That amount is equivalent to about USD 270 thousand.
The agency has planned to enact and implement the application of this amendment next February. The collection of taxes will begin in 2023, after meetings between the vice ministry and the cabinet, according to local media Asia Today. The Ministry of Economy and Finance also spoke about the cryptocurrencies that traders have acquired before the amendment modification. In this regard, they will consider the highest market price immediately after 2023 or the actual acquisition price.
Regulation of Cryptocurrency Trading
There have been various debates surrounding cryptocurrency trading and the new tax regulation in South Korea. This has led the Korean authorities to change the dates for the entry into force of this amendment. The South Korean Ministry of Economy and Finance had already finalized the tax amendment plan on March 5th, 2020.
The planning and finance committee of the Korean National Assembly reported that it had proceeded to approve several amendments to the tax regulations. They did that after a work session to be able to establish a new regime for the field of cryptocurrencies, according to local media Yonhap.
The agency mainly sought to inform local virtual currency businesses and other actors in the financial system. That would allow them to adapt and respond effectively to new laws and tax regulations. To do this, they have the necessary support and infrastructure.
The National Assembly seems to have understood the situation. Several cryptocurrency exchanges and other entities of the ecosystem expressed difficulties in complying with and declaring these taxes. Furthermore, the Korean Blockchain Association requested the government to postpone the application of the new tax framework, referring to the year 2023. The approval in March 2020 of the amendments is another step towards the regularization of the crypto ecosystem. This fact meant that Korea was officially welcoming cryptocurrency. Besides, it was supporting the development of trust firms, digital wallet companies, and ICOs, among others.
South Korea and Cryptocurrencies
For years, South Korea has been fertile ground for the development of world-renowned technology companies and numerous cryptocurrency exchanges. In turn, the Asian country has become a reference center for blockchain technology and other forms of business in the crypto field.
Five of the country’s top banks have already announced their plans to provide cryptocurrency services. Following the standards of the Financial Action Task Force (FATF), the regulation allows controlling the possibility of money laundering-related crimes and combating the financing of terrorism. The new tax rates and other regulations seek to secure the development of the crypto ecosystem in South Korea. The country has outlined one of the legal and fiscal bills that serve as a frame of reference for other nations in Asia and the world.
By Alexander Salazar