Conflicting messages over crypto tax rules create confusion in South Korea

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South Korean government officials have created confusion this year with conflicting announcements regarding a possible repeal or modification of the next crypto tax which is expected to go into effect in 2022.

Throughout 2021, debate intensified in the National Assembly, South Korea’s legislature, over whether or how to change the crypto tax. If left unchanged, the tax will levy a 20% tax on income generated from crypto transactions exceeding 2.5 million Korean won, or approximately $ 2,100.

NFT regulations are the latest example of crypto asset confusion in the country.

On November 5, FSC officials declared definitively that NFTs would not be subject to the crypto tax based on FATF guidelines classifying NFTs differently from cryptocurrency.

But that decision was effectively overturned yesterday when FSC Vice President Do Gyu-sang said:

“The Ministry of Strategy and Finance is preparing tax arrangements for NFTs in accordance with the Special Reports Law. “

The Special Reporting Act dictates regulations relating to cryptocurrency, including taxation.

Some are skeptical that the government has the best interests of the crypto industry in mind, as the official political direction seems to change direction so frequently. Nam Doo-wan from Stablenode tweeted today: “Korean government: ‘We could change our position, but you will be slapped until that happens'”.

Since April 2021, several proposals to delay the tax of the Democratic Party, which holds a majority in the Legislative Assembly, gained momentum in the National Assembly until Finance Minister Hong Nam-ki of the People’s Power Party cancels them. The same thing happened in September and will likely happen again before the end of the year.

While the conflict between opposing parties is a fact, there is also an element of disinformation, as the media has wrongly reported that the tax has been delayed. This is a source of confusion for stakeholders in the crypto industry in Korea and is exacerbated by non-Korean journalists covering these issues.

Jun Hyuk Ahn, communications manager at Vegax Holdings, told Cointelegraph: “With the presidential elections coming up next March, the Democratic Party is trying to win favor with 20-30 year olds by delaying the tax.”

Related: South Korea’s Leading Blockchain Facing Increased Competition in the NFT Market

Although the FSC has shown that there is an internal conflict over how to apply the law as it is written, Ahn stressed that “the power rests with the National Assembly to change the law”.

The ability to change the law was ultimately hampered by the partisan politics of parties in the National Assembly where the Democratic Party had to confront Minister Hong.

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