Friday, September 30, 2022

South Korea to Impose 10-50% Gift Tax on Crypto Airdrops

The South Korean government regards crypto airdrops as gifts. As such, the government has announced that they are susceptible to tax payment under the legislation. Based on that law, about 50% tax has been imposed on all crypto airdrops received by the public. 

“The free transfer of assets is a ‘gift’ under the Inheritance and Gift Tax Act,” the announcement states. “In this case, a gift tax will be levied on the third party to whom the virtual asset is transferred free of charge,”

Previously, the South Korean government made its intention to issue tax income on all virtual assets. The plan had been to impose a 20% tax on gains of over 2.5 million won ($2,122) in a one-year period starting Jan. 1. According to an official of the Ministry of Strategy and Finance, part of these virtual assets are cryptocurrency airdrops. 

Airdrops are a marketing strategy devised by digital assets developers to promote awareness of that currency.

Specifically, free quantities of the currency are released to the general public in their wallet addresses. Most times, they are given as a reward for an assigned task like retweeting a post made by the company issuing the currency.

Third-Party Pays Gift Tax on Crypto Airdrops

For South Korea, the tax will be imposed on the receiver of the airdrop as stated by the official in response to an inquiry. Within three months of receiving the crypto airdrop, the receiver on his own will apply for a tax return. Then a 10-50% tax will likely be charged on the virtual assets. 

Not until 2025 before taxation will finally be imposed on digital assets capital gains. Now, the tax will be considered and imposed based on a case-by-case basis as agreed by the government. 

It would have to be decided whether a particular virtual asset transaction falls into the class of gift tax or not. To do this, the nature of the transaction would have to be verified. Considerations involving whether actual property and profits are transferred will be made.

For a while now, the Asian country has been putting up laws and regulations around cryptocurrencies. CEO of Terraforms Labs, Do Kwon was once accosted for trying to evade corporate and income tax.

In collaboration with the Financial Services Commission (FSC), the South Korean government is contemplating some regulations to contain the risk and insecurities that the crypto market is susceptible to. 

Victoria Nye
A Blockchain columnist who is enthusiastic about developing a network interface between the real world and the cryptosphere.

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