South Korean crypto holders have been warned by tax accountant Kim Dae-kyung to declare their overseas crypto exchange holdings to avoid potential tax consequences. Currently, crypto trading profits are not taxed in South Korea if done on domestic platforms, but a new law will require traders to file capital gains declarations and pay taxes on profits over a certain threshold starting next year. Failure to declare overseas assets on tax declarations could be considered a violation of tax laws, with declarations required to be completed by the end of June this year.
Kim explained that overseas financial account declarations are mandatory under the Income Tax Act, with residents required to report accounts exceeding a certain balance by June 30. Failure to declare could result in fines or prosecution, as tax bodies now have access to information regarding individuals’ overseas accounts through data sharing agreements with other countries. The tightening of global regulation of crypto exchanges has extended to token wallets, with data sharing between international exchanges becoming mandatory in many areas. Fines for non-reporting are significant, at around 10-20% of the wallet balance, and failure to report wallets containing over $3.6 million worth of assets could lead to criminal prosecution.
In December 2020, lawmakers added crypto-specific clauses to the tax code in South Korea, covering accounts opened overseas to trade cryptoassets. President Yoon Suk-yeol had pledged to raise the tax threshold for domestic crypto trading profits to around $41,000, but the warning to declare overseas assets suggests the importance of complying with existing tax laws. The National Tax Service now has the ability to access an individual’s overseas account information, indicating the increased scrutiny on crypto holdings and the importance of proper reporting to avoid potential fines and legal consequences.
The reminder to declare overseas crypto holdings comes amid the increasing global regulation of cryptocurrencies, with tax authorities in South Korea and other countries exchanging data to identify individuals with overseas assets. While crypto trading profits were previously untaxed in South Korea, the new law requiring declarations and payment of taxes on profits over a certain threshold signals a shift in the treatment of crypto assets for tax purposes. Failure to comply with reporting requirements could result in significant fines or criminal prosecution, as tax authorities are now able to access information on overseas accounts to ensure individuals are accurately declaring their assets.
Kim’s warning serves as a caution to South Korean crypto holders to ensure they are in compliance with tax laws and reporting requirements. With the deadline for declaring overseas assets approaching, individuals are urged to complete the necessary declarations to avoid potential consequences such as fines or prosecution. The increased scrutiny on overseas accounts and the exchange of data between tax authorities highlight the importance of accurate reporting and compliance with tax laws, as failure to do so could result in significant penalties. As global regulations on crypto assets continue to evolve, it is essential for traders to stay informed and adhere to reporting guidelines to avoid any potential tax issues.
