Crypto tax implementation delayed for three months
The government will categorize the profit as extra income starting from January of 2022, according to the revised tax law that passed on Monday. In the previous proposal, the levying was set for Oct.1, but the committee postponed the implementation of the revision for three months. The way the government charges the income tax remains the same, as it will assess the annual profit to see whether an investor is liable for the 20 percent tax. If the profit goes below the 2.5 million won, the tax won’t apply. If a person gained 5 million won in 2022, the person will be subject to the 20 percent tax for 2.5 million of the 5 million won since the remaining 2.5 million is considered as tax-free allowance. Those who living outside of Korea or foreign entities will be required to pay either 10 percent of the selling price of cryptocurrency or 20 percent gains on transfer. The government will withhold a lower portion among the two options directly from crypto exchanges. The withholding will take place in each transaction. The government appears to reflect the concerns from the crypto industry in delaying the imposition, given that some worried time is too short to establish infrastructure needed for the new taxation system. Korea Blockchain Association appealed for the postponement in October because cryptocurrency businesses also need to prepare for the registration of their business in accordance with the Act on Reporting and Using Specific Financial Transaction Information. The act, due to take into effect in March next year, will require all crypto businesses to register at the Korean Financial Intelligence Unit by Sept. 2021. Then if the schedule for new taxation goes as planned in October, the business operator would only have one month to come up with taxation data. The association called for one year and three months of delay, although the government settled at three months. The committee also finalized its plan to expand its taxation on financial investments. It set up a new tax category for all kinds of stock investment gains over 50 million won, starting 2023. The stock transfer tax will be lowered to 0.15 percent to 0.08 percent in the same year. The committee’s latest decisions will likely keep on fueling controversy surrounding the fairness between cryptocurrency market and stock market. The stock investment’s ceiling for tax is 50 million won while that of crypto market is 2.5 million won. The levying of tax comes a year earlier to crypto investors, which triggered criticism for being unfair. “It is unfair for cryptocurrency businesses because they are put in a rushed schedule while the tax increase for stock investment profit starts in 2023, even with the established taxation system,” the association said.