Government Plans to Introduce Virtual Asset Transfer Tax as Scheduled... First Implementation in May 2023

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] The government has reaffirmed its existing position that capital gains from virtual assets occurring after next year must be reported and paid as capital gains tax starting from May 2023. Plans include building a computerized system for this purpose and providing prior guidance to businesses.

On the afternoon of the 28th, the government held a vice ministerial meeting of related ministries at the Government Seoul Office, chaired by Koo Yoon-cheol, Minister for Government Policy Coordination, and announced the "Virtual Asset Transaction Management Plan," confirming this stance.

According to the management plan announced that day, income generated from the transfer or lending of virtual assets after January 1, 2022, must be reported and paid when filing comprehensive income tax starting from May 2023.

Profits and losses from the transfer or lending of virtual assets over one year will be aggregated, and if there is a profit, it will be classified as other income and taxed separately at a 20% rate (with a basic deduction of 2.5 million KRW). The acquisition cost of virtual assets held before January 1 of next year will be based on the higher amount between the market price as of December 31, 2021, and the acquisition cost of the virtual asset. For non-residents or foreign corporations, virtual asset service providers will withhold taxes on income generated after the reference date (January 1 of next year) and remit them to the tax authorities.

Regarding this policy, the government explained, "Considering the taxation principle that income is taxable where it exists, fairness among income types, and taxation trends in major overseas countries, taxation on virtual asset income is necessary," adding, "Taxation on capital gains from virtual assets is at a level similar to the taxation system for overseas and unlisted stocks." It further stated, "Taxation will be implemented based on measures to prevent participant damage such as cracking down on illegal activities and enhancing transaction transparency (including amendments to the Special Financial Transactions Information Act and its enforcement decree)."

The government plans to promote prior guidance to virtual asset businesses (such as submitting tax data) and the construction of computerized systems to prevent confusion caused by the implementation of taxation. Additionally, the Virtual Asset Related Ministries Meeting (chaired by the Minister for Government Policy Coordination) will be held regularly to continuously monitor the progress of tasks by each institution.

This content was produced with the assistance of AI translation services.