Victor Ugochukwu · Dec 14, 2020 . 5min read
South Korea Taxes Cryptocurrencies at 20%, Inflicts Highest Income Tax Rates
South Korean government confirms tax law amendments presented at the State Council meeting held on the 25th, taxes cryptocurrencies at 20%..
By Komal Joshi · Aug 26, 2020 . 7min read
The South Korean government confirms tax law changes presented on July 22. At the State Council meeting held on the 25th of this month, amendments to 16 tax laws, were approved. It includes the Basic National Tax Act, the Income Tax Act, the Corporate Tax Act, and the Inheritance and Gift Tax Act. The Korean government intends to present the proposal to the regular National Assembly on the 3rd of next month.
The highest slab for an income tax rate is 45%. It will be imposed on people with an annual income of over 1 billion won. The top 0.05% (11,000 people) of income will be subjected to the changed income tax rate. The tax rate for people who earn less than 1 billion won endures the same.
The government asserts the establishment of a new stock transfer income tax. Starting from 2023, if you earn more than 50 million won per year with listed stocks or equity funds in Korea, you will have to pay 20-25% of the profits (transfer gains) as tax. The stock transfer tax will not be applicable if the annual income is less than 50 million won.
Foriegn Stocks, VAT & STT
Deductions for foreign stocks, unlisted stocks, bonds, and derivatives are lower than those of domestic stocks or domestic funds. In total, it is tax-free (deductible) up to 2.5 million won per year. The securities transaction tax rate, which is recently 0.25%, will decline by 0.02% points next year. In 2023, it aims at an additional reduction to 0.15%.
Along with this, the standard for simple taxpayers of VAT, mainly targeting small self-employed persons, will be expanded. The current yearly sales of KRW 48 million will be increased to KRW 80 million next year. The rise in sales standards indicates that the number of self-employed persons who are consolidated as simple taxation increases.
South Korea Taxes Cryptocurrencies
In a section headed, “Taxation on Virtual Asset Transaction Income,” the ministry added the new rules. It noted that presently both personal and foreign corporations’ virtual assets are non-taxable. The government asserts that including taxation for virtual assets is now essential. The government is taxing cryptocurrencies like Bitcoin for the first time. Income from cryptocurrencies below 2.5 million won annually ($2,000) falls below the minimum threshold and will not be taxed.
The tax rate is 20%, above the minimum threshold. It is on a level with the basic tax rate for most other taxable income and capital gains in South Korea. The National Assembly will get the revised tax code for approval before September 3. If approved by parliament, the new rules would then come into force on October 1, 2021.
Earlier, we reported that the South Korean government, which had earlier outlawed ICOs, amended the Reporting and Use of Specific Financial Information Act to acknowledge cryptocurrencies for the first time and recently classified them as taxable. Further, various South Korean banks plan to launch crypto custody services by March next year “at the latest.”
The tax law amendments will result in a surge in tax revenue of 67.6 billion won. Till 2025, the total tax inflicted on large corporations and the high-income group is supposed to increase by 1,876 billion won. However, the income and comprehensive real estate taxes will increase 6,512.8 billion won and 4,198.7 billion won.
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