The Ministry of Economy and Finance of Korea has announced on 1 December 2020 that it will impose a 20 per cent income tax on any profits made from trading cryptocurrencies such as bitcoin from year 2022. The tax reform was previously announced back in July 2020 by which this newly introduced income tax on virtual assets was supposedly to commence from October 2021, however, with this new announcement, the Ministry has informed that it has decided to postpone the application as it requires more time to set up the necessary taxation system.
For the purpose of income tax on any profits from virtual assets, it shall be taxed separately from other personal incomes such as any profits from other financial assets. The tax rate has been set at 20%, and it is applied to any profits exceeding 2,500,000 Korean Won (which is roughly about USD 2,300 as of today’s exchange rate) during a calendar year (which is also the same as a financial year in Korea).
This may be considered as a positive signal such that now the cryptocurrencies are now finally acknowledged and recognized as a new form of assets, as Mr Nam-Ki Hong, the Minister of the Ministry of Economy and Finance, has also admitted that “the digital virtual assets can be recognized as financial assets”.
The Korean cryptocurrency market has grown drastically in the last few years as evidenced by the reported annual trading volume of 500 trillion Korean Won (roughly about USD 433 billion), Korea is expected to become a global cryptocurrency business destination.