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HomeLaw & PoliticsSouth Korean government to impose new gift tax on crypto airdrops

South Korean government to impose new gift tax on crypto airdrops

South Korea's Ministry of Strategy and Finance is planning to impose a new gift tax on crypto airdrops. The tax will begin from 2025.

According to the most recent sources, the Ministry of Strategy and Finance is planning to impose a new gift tax on crypto airdrops. On August 22, the South Korean Ministry of finance and Strategy responded to an inquiry for tax law interpretation about whether a transaction in which a virtual asset issuer provides a person who possesses a certain digital asset of the same or a different sort is a transaction subject to gift tax. According to the Inheritance and Gift Tax Act, the free transfer of property qualifies as a “gift.”

The ministry stated:

“In this case, a gift tax will be levied on the third party to whom the virtual asset is transferred free of charge.”

For instance, if a crypto investor gets a virtual asset payment from an exchange as part of an airdrop incentive, this might make the investor liable for gift tax. The tax authorities have announced that while virtual asset gifts are already taxable, the taxation of financial profits from virtual assets will begin in 2025. This is due to the fact that gift tax is universally imposed on all items with economic worth that may be exchanged for money, as well as all legal and de facto rights that have financial advantages and property values.

A person who owes gift tax has three months from the end of the month in which the gift date falls to file a gift tax return, and a tax of between 10% and 50% is assessed. “In the event of a free transfer of virtual assets, the concept is of course the topic of taxation,” a representative from the tax business stated.

According to the authorities, the real taxation of gift tax should be taken into account on a case-by-case basis. According to the Ministry of Strategy and Finance,

“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.”

Even when taxes are collected, it is seen to be a concern since the tax authorities find it challenging to understand the specifics of contributions of virtual assets. The government has to be strengthened by new law in order to explicitly remove airdrops, etc. from the scope of gift tax.

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Vaishali Goel
Technology enthusiast, explorer and academic scholar. Currently exploring the crypto world. Join me in my journey to see how crypto, NFT and Metaverse will change the world.
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