South Korea’s Financial Services Commission (FSC) earlier announced that nonfungible tokens (NFTs), will be taxed starting from next year.
According to The Korea Herald, this tax law amendment would impose a 20% tax on income from virtual assets that exceed 2.5 million won ($2,102) as of Jan. 1, 2022.
The FSC’s vice chairman Doh Kyu-sang stipulated that only some NFTs would be categorized as virtual assets and therefore subject to “other income” taxes, referring to those used for investment or payment on a large scale.
Tax authorities are in charge of defining the full scope of taxable NFTs.
Crypto taxation has become a key part of the discussion in the regulatory debate.
On the one hand, some countries are imposing capital gain taxes based on existing rules while on the other, a few nations have framed new tax regulations on crypto transactions.
What you should know
This announcement differs from the FSC stance last month, when they issued a public statement reaffirming that NFTs are not virtual assets and would not be regulated.
Korean lawmakers now appear to view NFTs in the same taxable light as cryptocurrencies. A planned tax on cryptocurrency gains was set to take effect on January 1, 2022 but may now be delayed due to political pushback.
It has imposed a 30% tax on crypto transactions which is set to come into effect on the above date.
South Korea has recently been taking measures to regulate the crypto market, in a targeted effort against money laundering.
According to The Korea Herald, all 25 exchanges reviewed according to the August guidelines were found to have “inadequate levels of preparedness” with none of them meeting all the registration requirements.
The Finance Ministry, however, disagrees with FSA’s evaluation of NFTs and believes it’s still controversial to categorize them as virtual assets. Finance Minister Hong Nam-ki had said, “[I think] NFTs do not belong to virtual assets yet.”
South Korea has emerged as one of the most regulatory sound crypto ecosystems after its recent implementation of AML guidelines.
The new regulations pushed out hundreds of unregistered mainly comprising of small and medium-sized crypto exchanges, as they failed to fulfil the criteria of registration.
As the NFT marketplace rapidly expands in South Korea and the world, the debate over regulation versus innovation remains controversial.