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Cryptocurrency Tax Rules

MISBLOC’s perspective on the upcoming tax regulations

MISBLOC (Medical Information Service with Blockchain) is a medical service ecosystem which is based on blockchain technology. MISBLOC offers a sustainable and efficient medical service ecosystem by providing reliable medical information to patients, medical institutions, and public institutions in the Big Data era.

Hi there! It’s obvious that any industry which currently stands at a rough valuation of more than USD 0.5 trillion will have to undergo certain speculations and manipulations. Thus, governments around the world are working hard in order to prevent cases of falsification or malfunction found in the cryptocurrency market. Therefore, all countries (both developing and developed ones) are currently coming up with certain regulations in order to oversee business in the cryptocurrency market to deliver a safe and transparent space for investors.

Cryptocurrency Tax Regulation

Starting from October 1, 2020, cryptocurrency investors will be required to pay a 20% capital gain tax on excess profits, if that profit goes beyond USD 2100. If profits do not exceed this threshold, the taxation will not kick in. Non-residents and foreign corporations that trade on South Korean exchanges will also be taxed. Under the new rules, Korean exchanges will be responsible for deducting taxes from transaction gains and paying them to the Korean customs office.

Taxation Period

According to the Income Tax Act, the taxation period will take place from the 1st of January to the 31st of December, essentially 1 year. Cryptocurrency taxes can be paid after reporting them together during the comprehensive income tax reporting period in May 2022. Cryptocurrency items will be added to the comprehensive income tax return form in the future.

Report Method

South Korean cryptocurrency exchanges will start providing additional services to investors to assist them with reporting their taxes. Thus, you will be able to confirm the numbers in your capital gains through the exchange and report them in your tax forms later. At the same time, the National Tax Service will separately receive the details of all transactions incurred in domestic exchanges on a quarterly basis and will compare them with every investor’s taxation report.

※ If an investor uses a domestic exchange that does not provide tax services, the investor should directly calculate the taxable income by computing the capital gains and report it to the National Tax Service.

Capital Gain Calculation

Taxes are levied on the proceeds deducted from the purchase price and additional expenses (transaction fees, tax expenses, etc.) combined with the selling price during one year. It will be calculated for the threshold above USD 2100.

Reporting accounts on overseas exchanges

The existence of overseas exchange accounts should be reported to taxation authorities in addition to the report and payment made annually in May. The National Tax Service will add a crypto exchange account to the list of overseas financial accounts once it is reported. However, if you decide to go down a dark path and not report your account, you will have to pay additional taxes and fines if you’re caught. In fact, you will be charged 20% for non-reporting and 40% for cheating (60% for out-of-regional transactions).

Can I use the OTC market to avoid taxation?

Once the revised Specific Financial Information Act takes effect in March next year, OTC companies operating in Korea will be defined as Virtual Asset Service Providers (VASP) and will be required to directly report to financial authorities. However, it is not clear whether OTC companies will be required to report to the National Tax Service or not as the enforcement ordinance of the tax law has not been issued yet.

Will it be possible to pay fewer taxes if the numbers in the capital gains are small? Can we transfer the assets to our personal wallet before the tax is enforced and sell them as soon as we deposit them into the exchange after the tax is enforced?

Taxpayers will have to prove the acquisition value of the crypto they had even before the tax was enforced. Therefore, even if you do not personally prove it, it will still be determined by September 30, 2021. If you acquire it after the enforcement of the tax and fail to prove it, the acquisition price will be 0 KRW. This means that sales excluding 2% of the local taxes will have to pay 20% of the total tax.

MISBLOC can be found on different platforms!

Dear reader, thank you for spending your valuable time reading this post! If you want to stay updated with the activities of MISBLOC, make sure to follow the channels below!

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MISBLOC offers a sustainable medical service ecosystem, by utilizing selected medication information in a combination with a blockchain technology in the MyData era, which is the era of big data of individual lifelog, that connects telecommunication-medical-financial spheres.

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Medical Information Service with Blockchain

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