The list of crypto haven nations just got a little longer. South Korea has – for the time being – joined the ranks of Germany, Malta, and others where profits derived from cryptocurrency trading are tax-free.
The Ministry of Strategy and Finance (MOSF), in charge of the country’s economic policy, recently revealed that profits on cryptocurrency trading won’t be taxed.
The South Korean regulator stated that taxes cannot be imposed on individual investors’ crypto profits under the current law because it is not explicitly named as a taxable financial investment.
In fact, the term “virtual currency” – or any other similar term, for that matter – does not appear anywhere in the country’s current tax laws, hence the exemption.
“Profits from individual virtual asset transactions are not listed income and are not taxable,” a spokesperson for ministry stated.
The announcement has, not surprisingly, been met with positive response by the crypto community, with some taking aim at countries whose tax laws are not so crypto-friendly.
Twitter user @JoeSmo05464358 took a dig at the United States’ Internal Revenue Service (IRS), saying simply, “Your move, IRS.”
Gold Bullion International co-founder Dan Tapiero pointed to South Korea’s announcement as a catalyst for quicker crypto adoption if other countries were to follow suit:
People sometimes ask me what would quicken adoption. If the US were to follow South Korea and others, Bitcoin/crytpo/blockchain becomes an asset class overnight. “Getting off Zero” then becomes priority. At some point “Sputnik moment” galvanizes action.https://t.co/5xto47Iune
— Dan Tapiero (@DTAPCAP) December 31, 2019
Other countries where crypto profits are tax-free
As mentioned previously, South Korea has joined the ranks of several other countries where crypto profits are exempt from taxation, including:
In August 2019, the Portuguese Tax and Customs Authority exempted both crypto trading and crypto payments from taxation. It should be noted that this exemption applies to individual investors only. Businesses still need to pay taxes on their crypto profits.
Bitcoin and other cryptocurrencies’ have enjoyed tax-free status in Germany since 2013. Cryptocurrencies are considered “intangible assets” and their trade or use as a means of payment is considered as a “speculative transaction.”
Under current tax law, any transaction of 600 EUR or less is exempt from taxes and any gains from the sale of cryptocurrencies held for more than one year are also tax-free.
Previously, only profits from the sale of cryptocurrencies held over longer periods for investment purposes were tax-free in Singapore, however as of January 1, 2020, the “exchange of digital payment tokens for fiat currency or other digital payment tokens” are exempt from taxation.
Cryptocurrencies purchased as a long-term investment, similar to bonds, are not subject to tax when they are sold. Conversely, crypto trades that take place during the course of a single day are treated similar to stock and commodity trades where any gains are subject to taxation.
In 2018, the President of Belarus signed a decree stating that income derived from the mining, creation, buying, or selling of cryptocurrencies is tax-free.
In addition, profits arising from cryptocurrency investing are also exempt from taxation. The tax benefits outlined in the decree are good through January 1, 2023.
Last year, the Georgian Ministry of Finance declared that profits derived from individual investors’ crypto trading activities are income tax-free. Likewise, the sale of cryptocurrencies by both individuals and businesses is also a nontaxable event.
Possibility of crypto taxes in future
South Korean crypto traders shouldn’t go hog wild just yet, however. Although traders can currently transact without facing taxes, the Ministry of Finance and Strategy revealed they are working measures to include digital assets to the country’s tax laws.
Following such a decision, the crypto community would expect a clearer definition of cryptoassets, including how and when to categorize profits as capital gains and how to get trading records from crypto exchanges in order to calculate taxes.
A member of the ministry said that meetings have already taken place. Also, the government plans to complete the revised bill by the first half of this year.
A spokesperson for the ministry explained:
“We’re preparing a taxation plan for virtual assets by comprehensively reviewing the taxation of major countries, consistency with accounting standards, and trends in international discussions to prevent money laundering.”
It appears unlikely that the South Korean government will allow tax exemption on crypto trading profits to continue for long.
For instance, despite exempting domestic crypto transaction profits from taxes, South Korea’s National Tax Service (NTS) imposed 80.3 billion won (US$69.5 million) in withholding taxes on Bithumb Korea’s foreign customers’ past trades.
Please note that neither Micky nor any of its writers are tax experts and the contents of this article cannot be taken as tax advice. It is recommended that you seek the advice of qualified tax professionals for clarification on your country’s tax laws.