South Koreans required to report overseas crypto accounts

In South Korea, virtual asset investors with more than 500 million Korean won, or approximately US$418,935, worth of crypto assets in overseas accounts must report to their regional tax authorities beginning in 2023.

Fast facts

• According to a new year guidebook by the Ministry of Economy and Finance, any resident or domestic corporation with overseas account deposits of more than 500 million won on any last day of the 12 months this year must notify the tax office director of the jurisdiction from June 1 to June 30, 2023. This is according to a new tax law amendment in July 2020. 

• The government included overseas cryptocurrency accounts to this specification to accumulate information on the taxable mass amongst cryptocurrency investors who use foreign crypto entities, as income from virtual assets is planned to be taxed 20% starting 2023. 

• The gains tax on virtual assets, which was originally scheduled to be levied the first day of this year, was delayed by one year in December following resistance from investors, experts and politicians. Those in opposition contested the tax law schedule for two main rationales. First, they argued crypto income should not be taxed until there is an effective measure of protection for virtual asset investors. Another is that the taxation plan is unfair when compared to taxing stock capital gains. While virtual asset gains over 2.5 million won (about US$2,095), stock capital gains tax is scheduled to start on Jan. 1, 2023 from 50 million won, which is around US$41,911.

• As the voices demanding the pushback for the crypto tax law grew louder, especially among the Koreans in their 20s and 30s, both the ruling and opposing political parties started to endorse the delay. Cha Dong-jun, professor of tax accounting at Kyungbok University, told Forkast.News that the coming presidential election in March 2022 has affected their stance towards the crypto tax plan, with the votes of those in their 20s and 30s are considered a crucial winning factor for the election.

• The debate for constructing the most efficacious crypto tax plan remains active in Korea even after the delay, on classifying virtual assets as financial assets, and in taxing NFTs (non-fungible tokens). In neighboring Japan, however, investors are slammed with a tax rate up to 55% to those who earn more than 40 million Japanese yen (about US$347,238) from virtual assets, leading many investors to drop virtual asset holdings from their portfolios. China, on the other end of the Korean peninsula, has declared crypto mining and trading illegal.

   
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