South Korean Tax Authorities Extend Deadline for Complying with New Laws

South Korean Tax Authorities Extend Deadline for Complying with New Laws

For months, South Korea has been facing some significant difficulties with its crypto tax laws. Exchanges have proven to be a tad delinquent when it comes to enforcing the new laws and now they have been given some breathing room after a new development. It was reported by a local news source that the South Korean National Assembly is planning for a three-month delay in its implementation of new tax rules regarding crypto gains. According to the news source, this new development comes due to heavy lobbying on the part of industry insiders. If they have been successful, then the new tax rules that aim to implement a 20% tax on crypto gains, will not be applicable before January 1st, 2022. 

The announcement about the tax laws had first been made in July. On July 22nd, there had been a meeting of the Tax Development Review Committee and the tax code had been published by the Ministry of Economy and Finance. This explained that a 20% tax on crypto trading gains would be applicable under the new framework. The government is planning to use it for taxing gains made from intangible asset and virtual currency trades. Calculated annually, these taxes will be applicable on profits in excess of 2.5 million won, which is the equivalent of $2,000, in a year. 

This is the same rate that’s applied to most other taxable income and capital gains in South Korea. Proper guidance is provided by the new rules for calculating income that’s generated through crypto trading. It confirms that the government is planning on taxing foreign nationals and corporations that use South Korean exchanges for trading. In fact, the responsibility of deducting these taxes from any transaction gains will be entrusted to the exchanges, before they remit them to the customs office. 

Initially, the rules had been set for implementation by the country’s parliament from October 1st, 2021. However, there had been an immediate reaction from the Korean Blockchain Association (KBA). According to a report by a news source, regulators had been asked by the KBA to delay the implementation of the new tax laws till January 1st, 2023. The association said that from September 30th, 2021, the current tax laws would cease to apply. This would give exchanges a very short window to apply a new tax regime, which would come in force from the next day.

While the government didn’t provide the 15-month extension demanded by the KBA, they will give three months, which should be enough for the exchanges. Other than taxation, there are some privacy implications also associated with these new rules. It was reported in September that legal experts were confused over the new know-your-customer (KYC) and anti-money laundering (AML) policies of the government. In 2018, the Enforcement Decree of the Special Payment Act had been passed by the government, which would require the real-names and social security numbers of customers using virtual asset services provider. However, this is a direct contradiction of the country’s Personal Information Protection Act.