South Korea’s Ministry of Strategy and Finance clarified on Monday that virtual asset airdrops, staking rewards, and hard forked tokens would be subject to a gift tax under the Gift and Inheritance Tax Law, to despite the deferral of the tax on profits with cryptocurrencies until 2025.
South Korean law officially considers cryptocurrencies to be part of virtual assets.
In response to a query about tax law regarding virtual asset transfers by cryptocurrency exchanges, the South Korean tax authority said that Any free transfer of virtual assets by cryptocurrency exchanges in the form of airdrops, staking rewards, and hard forked tokens would incur a gift tax.
The gift tax “the third party to whom the virtual asset is transferred will be charged free of charge”, a local news publication reported.
The tax authority clarified that, although the tax on profits from virtual assets is applicable from 2025, free transfers of virtual assets will continue to be subject to a 10-50% tax under the Gift and Inheritance Tax Act. This tax requires the recipient of the free “gift” to file a gift tax return within three months of receiving it.
Nevertheless, The ministry also clarified that the actual taxation of these virtual asset transfers must be considered on a case-by-case basis, given the lack of regulations around the virtual asset market. A Ministry statement reads:
“Whether or not a specific virtual asset transaction is subject to gift tax is a matter to be determined in light of the transaction situation, such as whether it is consideration or whether real property and proceeds are transferred.”
The lack of clear regulatory guidelines has caused the authorities to defer tax on gains from virtual assets on multiple occasions. It is quite complex for them to examine all types of virtual asset transactions and build a legal basis around them. Thus, it is difficult to understand the details of donations of virtual assets, even when taxes are applied.
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