South Korean Authorities to Levy Gift Tax on Crypto Airdrops: Report

South Korea has pushed back the adoption of capital gains tax to 2025.

By Shomik Sen Bhattacharjee | Updated: 22 August 2022 18:30 IST

South Korean Authorities to Levy Gift Tax on Crypto Airdrops: Report

Photo Credit: Unsplash/ Daniel Bernard

Airdrops are hugely popular in the crypto space especially among newer projects

Highlights

Officials note that there is a lack of a monitoring system
The government pushed back the adoption of capital gains tax last month
South Korea has been tightening its grip on crypto trading lately

Cryptocurrency airdrop, which refers to a marketing stunt involving sending coins or tokens to wallet addresses, is now legally subject to gift tax in South Korea, according to the country's Ministry of Strategy and Finance. As per local news reports, the Ministry of Economy and Finance's Tax and Custom's Office has said that crypto issuers delivering coins or tokens to wallets of traders for free will be subjected to the nation's gift tax under the existing Inheritance Tax and Gift Tax Act.

As per a Yonhap News report (in Korean), even though South Korea has yet to impose capital gains tax on crypto trading, it currently levies gift tax on assets “gifted” between parties. However, it lacks detailed standards and monitoring system on crypto "gifts" including airdrops.

A tax industry official said, "In the case of a gratuitous gift of virtual assets, the principle is of course subject to taxation." The Department of Strategy and Finance noted, "Whether a specific virtual asset transaction is subject to gift tax or not must be determined taking into account the transaction situation, for example whether it is a consideration or whether actual assets and profits are transferred."

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The latest announcement follows the ministry's decision earlier this month to levy gift tax or inheritance tax for more than 15 years if a crypto user is found to have illegally gifted or inherited more than KRW 5 billion (roughly Rs. XXX crore) worth of coins or tokens to another party. The government can currently levy gift or inheritance tax for 15 years on an individual that has given "gifts or inheritance" illegally or without notifying the government.

Last month, CoinDesk reported that the government pushed back the adoption of capital gains tax to January 1, 2025 — from the initial January 1, 2023 — citing the need for more time for crypto exchanges and businesses to set up tax systems. It plans to levy 20 percent capital gains tax on any annual gains of more than KRW 2.5 million (roughly Rs. 1.5 lakh) earned from trading of cryptocurrencies.

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