• South Korea’s financial authority now says NFTs can be taxed

  • South Korea’s Financial Services Commission (FSC) has said that some NFTs (non-counterfeitable tokens) will be taxed starting next year, reversing the finance minister’s position on the subject announced just last month. The scope of taxable NFTs has yet to be determined by the tax authorities.

    Doh Kyu-sang, vice chairman of the FSC, told the National Assembly yesterday that the South Korean government believes NFTs can be taxed through existing regulations covering virtual assets.Doh added that the Ministry of Economy and Finance is currently preparing for the taxation of NFTs.

    However, the FRA recognises that not all NFTs should be taxed or classified as virtual assets – the financial authority believes that NFTs issued on a large scale and intended for investment or payment need to be classified as virtual assets and taxed accordingly. At the National Assembly meeting, Goh mentioned that the full scope of taxable NFTs will be defined by the tax authorities in the future.

    The debate on taxing NFTs has been developing since last month, when South Korean Finance Minister Hong Nam-ki said that NFTs are not part of virtual assets and therefore would not be taxed in the coming year, although he has recognized that more discussion is needed.

    The amendment to South Korea’s tax law stipulates that income from virtual assets amounting to more than 2.5 million won (about $2,102) will be taxed at a rate of 20 percent from Jan. 1, 2022. The announcement sparked controversy, with investors arguing that the tax is unfair as cryptocurrency income over 2.5 million won is taxed, while the 20 percent tax rate on equity capital gains is set to begin on January 1, 2023 at 50 million won (about $42,048).

    Lawmakers from both the ruling Democratic Party and the conservative People Power Party have introduced bills to delay the taxation of cryptocurrency gains by a year or two. A tax subcommittee of the National Assembly’s Strategy and Finance Committee has begun discussing policies to reduce the tax burden on virtual assets.

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