South Korea: Taxes on cryptocurrency transactions expected to start in 2020

The South Korean government is preparing to take legal measures to tax capital gains from the sale of crypto assets. Special legislation for digital asset transactions is expected to be introduced in the 2020 tax season.

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South Korea plans to charge cryptocurrency capital gains tax

South Korea has been one of the most active cryptocurrency speculation markets. However, according to the Korea Times, there is no direct taxation framework for capital gains from the sale of digital assets. The South Korean Ministry of Economy and Finance is working on this measure, and it will become a tax bill starting next year.

An official from the South Korean Ministry of Economic Affairs stated:

"Related discussions have begun. The revised bill will be drafted in the first half of next year."

The Korean National Assembly has also been studying a cryptocurrency tax bill. The final bill will increase the transparency of all aspects of the digital currency transaction process. But it is certain that South Korea will tax capital gains from the sale of digital assets.

Once the law requires a tax on capital gains, Koreans may have to provide a detailed history of cryptocurrency transactions. The virtual currency exchange must also keep separate records for each user, as well as detailed personal information.

The end of anonymous transactions

Most cryptocurrency exchanges already have a KYC program to handle digital currency transactions. Korean traders must also link their exchange account numbers to bank accounts and trade directly in Korean won. With the exception of decentralized exchanges or unknown markets, anonymous trading is almost impossible in 2019.

The taxation of bitcoin and other digital currencies runs counter to the spirit of cryptocurrencies, however, the sale of virtual currencies generates legal gains and is taxable.

Korean interest in cryptocurrency trading has declined in 2019, and the share of South Korean won trading pairs has declined. This is partly due to reduced activity in the competitive coin market. But Bitcoin remains attractive and remains one of the main sources of revenue in 2019.

The South Korean won currently accounts for only 0.84% ​​of the total bitcoin transaction, which has fallen sharply since the peak of transaction activity. Despite this, there was a brief spike in trading volume last month.

South Korea has joined the ranks of countries that track cryptocurrency transactions, similar to the tough approach taken by agencies such as the Internal Revenue Service (IRS).