Amid the continuous debate surrounding virtual property tax in the nation, South Korea’s Financial Authority just recently announced non-fungible tokens (NFT) as taxable. On Tuesday, The Financial Services Commission (FSC) of South Korea, revealed that it would begin taxing NFTs.
According to The Korea Herald, from January next year, this tax law modification would enforce a 20% tax on earnings from virtual properties that surpass 2.5 million won ($2,102).
Proposed Tax On NFTs
Vice-Chairman of the FSC, Doh Kyu-sang, stated that NFTs are virtual properties under the existing Act on the Specified Financial Transaction Information. And for that reason, the federal government is entitled to gather taxes on them. “Under the law, any income earned from purchasing and selling virtual assets is subject to “other incomes” and based on tax.”
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The FSC’s statement, nevertheless, varies from its earlier declaration. An assistance report from the Financial Action Task Force (FATF) specified that “NFT, or crypto-collectibles, depending on their characteristics are generally not considered to be [Virtual Assets].” Based on this standard, the FSC openly specified that it would not control NFTs.
Finance Minister Hong Nam-ki likewise stated last month that there was still some unpredictability about whether NFTs fall under virtual properties. His viewpoint was, “NFTs do not belong to virtual assets yet.”
Park Sung-Joon, head of Blockchain Research Center at Dongguk University, spoke on the contradiction.
“In the situation where the financial authorities are contradicting each other, it is confusing for market players of virtual assets to know whether they must pay taxes or not,” he stated.
He likewise compared the proposed tax on NFT to the tax rates of genuine properties. According to the law, owners of virtual properties need to pay a 20% tax on all NFT earnings above 2.5 million won. In contrast, owners of real paintings pay a 22% tax on earnings above 60 million won.
According to Park, if the authorities need to enforce taxes on NFTs, the rates ought to resemble genuine properties. There is no factor for much heavier tax on NFTs.
Crypto Tax In South Korea
The South Korean NFT tax law follows the very same tracks as the proposed tax on cryptocurrencies. In 2020, legislators created questionable tax on earnings from purchasing cryptocurrencies.
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Similar to the NFT tax law, this law likewise enforces a 20% levy on cryptocurrency gains above 2.5 million won. The law was to work from January 2022. However, legislators from The opposition People Power Party are promoting a one-year extension. They are likewise promoting for tax rates modification in line with the proposed Financial Investment Income Tax routine.
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