South Korea: Crypto-airdrops might soon be subject to Gift Tax
According to a report by South Korean news agency Yonhap News, virtual asset transfers for free are subject to gift tax. This, as per the guidance of the Ministry of Strategy & Finance in the country.
Only last month, the ministry had postponed its decision to tax asset gains tax to 2025.
In response to a tax law interpretation enquiries, the government said that a free transfer of a virtual asset (cryptocurrency) would be considered a gift under the Inheritance and Gift Tax Act. Ergo, they would be taxed accordingly.
A number of free cryptocurrency transfers, including virtual asset airdrops, staking rewards, and hard fork tokens, would be subject to gift tax in South Korea.
An asset airdrop is a promotional activity in which small amounts of a new cryptocurrency are sent to different wallet addresses for free in order to generate awareness about the new entrant. A virtual asset can be staked to earn a reward of additional tokens over time. A hard fork entails the creation of assets that are transferred to different wallets to be transacted on the new infrastructure.
All such free transactions would be subject to a gift tax in South Korea, as per this clarification.
Yonhap News added that in South Korea, a gift tax is levied at a rate of 10-50%. Anyone obligated to pay the said tax must file its return within 3 months of receiving a gift.
The government, however, added that whether a specific virtual asset transaction is subject to gift tax or not is a matter to be determined in consideration of the transaction situation. Such as whether it is a consideration or whether actual property and profits are transferred.
The South Korean government has time and again attempted to introduce taxation in relation to cryptocurrency.
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