South Korea is known as the global crypto hub, generating a record of $823.4 million by 2025. This is achieved due to its tech-savvy population, its driving force. Causing the crypto economy to become a “Kimchi Premium.”, where prices are higher than in other parts of the world. In the country, the National Tax Service (NTS) maintains cryptocurrency(they enforce laws and prevent tax evasion.
The Tax Authorities and Regulations
Furthermore, the authority in charge of maintaining cryptocurrency in South Korea is the National Tax Service (NTS). At the same time, it works with the Financial Services Commission (FSC) and Korea Financial Intelligence Unit (KoFIU). Nevertheless, there will be proper guidelines for cryptocurrency firms after the establishment of the Digital Assets Basic Act this 2025. This is mainly with respect to listings and transparency.
In December 2024, they passed a 2025 tax reform bill, which contains the latest policies that consider Digital assets as intangible Assets.
List of Cryptocurrency Taxes in South Korea
- Income Tax: This tax applies to all cryptocurrency earnings, either earned from airdrop payments for services, mining, or staking.
- Capital Gains Tax: This applies to earned profits from selling or trading cryptocurrencies exceeding a certain threshold margin.
- Value-Added Tax: There is no imposition of VAT on cryptocurrency transactions. This is because in South Korea, Cryptocurrencies are neither goods nor services.
- Lastly, Other Taxes: A no wealth or inheritance tax directly targets cryptocurrencies, while general inheritance tax may apply to crypto assets.
Its Rates And Brackets
- All staking, mining, or airdrop earnings are taxed as “other income”. This is at individual income tax rates, ranging from 6.6% to 49.5%, including local taxes.
- Cryptocurrency profits surpassing 50 million KRW (approximately $35,900) are annually subject to a 20% capital gains tax, or 22% with local taxes inclusive.
- Foreigners or corporations are subject to a withholding tax of 11% on the transfer price or 22% on net capital gains for crypto disposals.
- Unfortunately, no tax exemptions for small investors if gains are below 50 million KRW annually.
Cryptocurrency Transactions and Their Respective Tax Treatment
- Purchasing and selling: Cryptocurrency purchasing is not taxable; selling triggers CGT if profits exceed 50 million KRW annually.
- Cryptocurrency as Salary or Payment: Mainly treated as income, taxed at individual income tax rates.
- Cryptocurrency Mining and Staking: The form of taxation for this cryptocurrency earning is “income at the time of receipt” it is based on market value.
- Crypto-to-Crypto Trades: Considered taxable events, with gains calculated based on market value at the time of trade.
- DeFi, Lending, and Yield Farming: The form of taxation for Incomes from these activities are “other income.”
- NFT: The form of taxation for NFT transactions is “income”. If sold for profit, they will be subject to CGT.
Tax Reporting and Compliance
- Requirements For Filing: There has to be a report on annual income tax returns via specific schedules.
- Tax Forms: Schedule for virtual assets in income tax returns, detailing acquisition, transfer, and gains.
- Record-Keeping: Investors must maintain transaction logs, including dates, values, and cost bases, for at least five years.
- Deadlines and fines: May 31 is the due date for annual tax returns; late filing or underreporting incurs fines up to 20% of unpaid taxes, with added interest.
Deductions and Exemptions of Tax
In South Korea, cryptocurrency transactions have limited deductions. However, the cost of acquisition is always deducted while calculating taxable gains; also, transaction fees or other expenses can’t be claimed. There cannot be offset against other income or carried forward when there is a loss in a cryptocurrency transaction, unlike a stock market gain. Moreover, the 50 million KRW annual threshold for CGT acts as an exemption, freeing small investors. To claim allowable deductions, Investors must maintain an accurate record and ensure compliance with NTS guidelines.
Enforcements And Penalties Towards Non-Compliance
Undoubtedly, every country is strict with all law violators. South Korea is a no-nonsense country and has serious penalties for all violators. Mainly, under the NTS, it partners with exchanges and also uses advanced blockchain analytics to track cryptocurrency and transactions. Some measures also include the KYC and Anti-Money-Laundering rules. Failure to report or underreporting cryptocurrency taxes can result in penalties up to 20% of unpaid taxes plus interest. Notable offenses such as tax evasion may attract fines up to five times the unreported gains or at least a year’s imprisonment.
How Will This Help South Korea in The Future
The country is ready to live no stone unturned, while the world welcomes a cryptocurrency-centered future. There are new implementations of regulations on crypto taxation. The country has already pushed theirs towards 2027. This aligns with the OECD’s Crypto Asset Reporting Framework for better global transparency. Digital Asset Basic Act (DABA) promises to create stricter rules while encouraging innovation and protecting investors this 2025.
Conclusion
Most importantly, the country is fully ready for all cryptocurrency activities as it has strict regulations to enhance security. Also, from 2027, a 20% tax on crypto profits over 50 million KRW is possible. The government will keep a clear watch on all details and file taxes by May 31 each year to avoid big penalties.
