Key Takeaways
- The tax could be anywhere between 10-50% of the total value of the gifts received.
- Crypto airdrops will be subjected to the nation’s gift tax under the Inheritance Tax and Gift Tax Act
South Korea’s Ministry of Economy and Finance’s Tax and Custom’s Office is looking to introduce a new gift tax on airdrops for crypto assets.
Crypto airdrop, an unsolicited distribution of a cryptocurrency token or coin, usually for free, to numerous wallet addresses, is legally subjected to the nation’s gift tax under the Inheritance Tax and Gift Tax Act, according to officials.
As per South Korean media reports, the gift tax will apply to all objects of economic value converted into money.
The person obligated to pay gift tax must file for a gift tax within three months of receiving them. This could be anywhere between 10-50% of the total value of the gifts received.
Commenting on the development, an official stated, “The free transfer of assets is a ‘gift’ under the Inheritance and Gift Tax Act.
In this case, a gift tax will be levied on the third party to whom the virtual asset is transferred free of charge.”
In the official announcement, the Ministry had pointed out that though crypto airdrop is subjected to gift tax, the act must be assessed depending on the size of the asset, how much the sender received in return and other background information.
Earlier this month, the Government decided to levy gift tax or inheritance tax for over 15 years if a crypto user is found to have illegally gifted or inherited more than 5 billion coins or tokens from another party.
The latest developments come amidst South Korea’s increasing efforts to set a solid framework for cryptocurrency trading and related laws.
The Asian Country is currently taking note of crypto regulations from the U.S. and other countries to form its own crypto legislation.
The Financial Services Commission (FSC), the country’s financial regulator, also backs the need for rules to handle risks in digital asset trading. South Korea has yet to impose a capital gains tax on crypto trading.
In November 2021, the finance committee of the South Korean National Assembly approved deferring a 20% tax to be levied on crypto profits of over 2.5 million Korean Won (USD 2,105) until 2023.
Currently, South Korea’s regulations on cryptocurrencies comprise an amendment to The Act on Reporting and Use of Certain Financial Transaction Information, which mandated that crypto trading platforms acquire an information security certificate and provide users with real-name accounts.
