Tax regulations on crypto donations in South Korea may be getting more complex. Indeed, this time, it’s cryptocurrencies received as part of an airdrop that are in the regulator’s sights.
Tax airdrop for the South Korean government
The South Korean government may have found a way to half-stifle, the enthusiasm around airdrops. The South Korean Ministry of Strategy and Finance has informed about the application of inheritance and gift tax provisions to airdrops in the context of an investigation into the interpretation of tax legislation.
Specifically, airdrop recipients will have to pay gift tax at a rate of 10% to 50%. They will have to file their tax returns within three months.
An existing law with a vague outline for an emerging sector
A government that wants to fill the coffers of the state, will not surprise too much, observers. Still, the South Korean Ministry of Finance could have waited for a clear regulatory tax framework on cryptocurrencies to emerge. Instead, it is trying to enforce existing laws.
In theory, the gift tax affects all objects, which have an economic value. The Ministry of Finance tried to clarify the scope of this tax, and its limits, vis-à-vis the airdrop:
“Whether a specific virtual asset transaction is subject to gift tax or not must be determined by taking into account the situation of the transaction, for example, whether it is a consideration or whether real goods and profits are transferred.”
Case by case: fog surrounding the taxation of cryptocurrency airdrops
In practice, however, these explanations are not enough to prevent a regulatory nut. In fact, the South Korean government is reportedly of the opinion that issues related to the effective taxation of freely obtained cryptocurrency transactions should be handled on a case-by-case basis.
This position reflects a certain complexity of this topic, and thus the difficulty for the taxpayer, to determine for himself, whether or not he is required to report and pay a gift tax, on a given transfer of free virtual assets to his wallet.
On the airdrop side, South Korea thus seems to be deviating from its otherwise wise position of understanding and regulating cryptocurrencies, before taxing them.