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Individuals and foreign legal entities, through domestic VASP withholding

Regarding the "taxation guidelines for virtual asset transactions" in the 2020 tax law amendment, the Ministry of Planning and Finance stated that "the income tax law and the corporate tax law do not list the virtual asset transactions of individuals (residents, non-residents) and foreign legal persons. "Income tax items", "However, judging from the practice of foreign mainstream countries and the taxation of other income (stocks, derivatives), in order to ensure fairness, it is necessary for the government to tax this part of the income."

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The division of "nature of income" that has been debated is finally determined as "other income"

There has been a lot of debate in the industry about the nature of virtual asset income. Regarding the taxation items, people's guesses mainly focus on the three types of transfer income tax, other income tax and transaction tax. Among them, "transaction tax" is considered the least likely to be adopted by the government because it does not consider the fluctuation of cryptocurrency prices and does not conform to the taxation principle of "where there is income, there is taxation"; "other income tax" is also due to insufficient taxation standards. Clarity has aroused opposition from the industry. Therefore, the industry is cautiously speculating that the government may eventually tax cryptocurrencies under the "transfer income tax". The "Transfer Income Tax Additional Act" initiated by Councilor Liang Jingshu on July 12 is also in line with this idea.

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20% tax rate, annual tax allowance of 2.5 million won, will be implemented from October next year

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Someone launched a national petition: it is unfair

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The government needs to "gradually formulate detailed taxation guidelines"

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What are the tax-saving strategies for investors?

After the announcement of the taxation plan for virtual assets, how to save taxes reasonably is also a general concern of investors. Quan tax accountant said, "The most effective tax avoidance method within the legal scope is to sell the cryptocurrencies in your hands before tax collection, and then buy them again at a high level. In this way, when you sell after 2021, you can use them at a higher price. Calculate the buying price and reduce the difference between buying and selling." Because according to the special regulations on the purchase price, the purchase price can be calculated according to the market price of the day before the implementation date, and investors only need to pay income tax on the profits obtained after the implementation of the regulations. However, he said, "If you buy cryptocurrencies through overseas exchanges, even if the tax is imposed from October 2021, when calculating the cost of buying, it may go back to the previous price, so you want to hold it for a long time." Investors should prepare relevant certificates in advance", introducing issues that need attention.

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Can DeFi, stable currency, and P2P transactions be taxed reasonably?

For investors who use overseas exchange transactions to avoid taxation, the amendment clearly requires that investors' overseas transaction income be included in the scope of tax declaration, otherwise a maximum of 60% of the undeclared penalty will be charged. However, tax accountant Quan said, “the 60% non-declaration penalty for undeclared overseas transaction income has long existed. People who intend to evade taxes will still choose to trade on foreign exchanges.”

JOIND Reporter Park Sang-geol park.sanghyuk@joongang.co.kr

JOIND Reporter Park Sang-geol park.sanghyuk@joongang.co.kr