South Korea Govt. Clarifies Crypto Gifts Will be Taxed
The Government of South Korea had announced that it will not charge tax on virtual assets till 2025. The public welcomed this decision but there was confusion that whether the same applies to crypto gifts or not. The South Korean Ministry of Strategy and Finance has issued a clarification in this regard that gift tax will be charged on every convertible asset including airdrops and it has no relief till 2025.
No Tax Relief Granted to Digital Gifts
According to South Korean media, the Finance Ministry has interpreted the tax law that all airdrops of digital assets are subject to gift tax and the government is not providing any relief on gift tax. The govt will charge up to 50% tax on the market value of a gifted asset. The tax will be charged from the receiving person. In addition, the receiver is bound to pay the tax within three months after receiving a gift.
Answering the question of whether a transaction of any virtual asset as a gift will be subject to a tax or not, the ministry stated that the transfer of any asset without any payment is a gift as per the Inheritance & Gift Tax Act. The answer to the question was very precise a gift tax will be charged from the third party. If we interpret this reply, a gift tax will be charged on airdrops, deposits, and hard forks.
South Korea Needs Gift Tax Legislation
Officials from the tax industry have said that the clarification is not comprehensive and there is a dire need for proper legislation. It is important to reinforce the system with additional legislation to eliminate the misinterpretation of the law. Most of the virtual assets transactions in South Korea don’t have any legal basis and the related legislation is insufficient.
It is difficult for authorities to keep a record of the gifts and now people would try to hide gifts. In this situation, it would be a problem for South Korean authorities to fetch gift details.
