[KwonInwook] Is there tax for airdropped cryptocurrency?
[KwonInwook] Airdropped cryptocurrency is an outcome of investor activity, so shouldn’t it be tax-free? If you’re a cryptocurrency investor, there are times when cryptocurrency is airdropped to you, in other words, given for free. Some may consider this a byproduct of investment activity, but the question is not as simple as that. #Tax on free gains For corporations, tax is incurred for asset increases, whether related to business or not. Individuals pay gift tax for earnings not related to revenue and income tax. The tax standard will be the market price of the point of acquisition. There are cases where the gain was not earned for free, but is legally perceived as free. They are obtaining an object that is not owned by any one. #Tax according to air drop category Airdrop refers to earning cryptocurrency for free. It could happen in three instances: Hard fork, partnerships and promotion events. The end result may be the same — receiving cryptocurrency for free. But in the case of individuals, the taxation differs according to how you obtained that free asset. For corporations, all three will be claimed as corporate tax. #Will it really be taxed? There is no way for finance authorities to directly know one’s cryptocurrency trade record. An individual voluntarily coming forward to report tax duties on airdropped cryptocurrency is rare. But on promotion events that are widely publicized, the payer of the reward pays withholding tax at 22 percent and reports it to tax authorities so the recipient does end up reporting tax. Noticing which among a long list of trade records are airdrops is not an easy task. Even if a tax inspector does notice it, there is currently no tax law to impose duty on it. This may differ according to the tax inspector’s understanding and experience of cryptocurrency. There may cases where the customs office imposes tax regardless of vague tax standards on cryptocurrency. In this case, the investor may have to fight back legally to make one’s claim and pay the price for the legal battle. It’s important that crypto asset investors let down their guard thinking there is no legal basis to tax crypto assets. Be prepared for the worst scenario. Kwon In-wook, head accountant of IW Accounting Office