South Korea has repeatedly delayed raising cryptocurrency taxes due to a lack of investor protections and regulatory guidance.
South Korea’s Ministry of Strategy and Finance on Monday announced that virtual asset airdrops, staking rewards, and hard tokens will be subject to gift tax under the Inheritance and Gifts Tax Act despite the deferral of crypto income tax until 2025.
Cryptocurrencies are officially considered part of virtual assets under South Korean law.
In response to a question about the tax law on the airdrop transfer of virtual assets by cryptocurrency exchanges, the South Korean tax authority said that any free transfer of virtual assets by cryptocurrency exchanges in the form of airdrops, staking rewards, and hard tokens will attract gift taxes.
A local news publication reported that “gift taxes will be levied on third parties whose virtual assets are transferred to them free of charge.
The tax authority clarified that although virtual property income tax will now be imposed from 2025, free virtual property transfers will still be subject to a 10-50% tax rate under the Inheritance and Gift Tax Act. The aforementioned tax requires recipients of free gifts to file a gift tax return within three months of receiving it.
However, the ministry also explained that the actual taxation of such virtual asset transfers should be considered on a case-by-case basis, given the lack of regulations surrounding the virtual asset market. A statement from the ministry:
“Whether a particular virtual asset transaction is subject to gift tax is an issue that needs to be determined when considering the transaction situation, such as whether it is an asset and the actual profits transferred.”
The lack of regulatory guidelines is what has led to authorities repeatedly delaying taxes on virtual assets. It becomes quite complicated for them to examine all types of virtual asset transactions and form a legal basis around them. As a result, it is difficult to capture the details of donations to virtual assets, even when taxed.