The South Korean government announced plans on January 22 to impose a 24.2% tax rate on cryptocurrency trading profits, comprising a 22% corporate tax and a 2.2% local income tax. This move follows an unprecedented anti-money laundering (AML) investigation targeting six major Korean banks.
Key Details of the Tax Policy
- Tax Breakdown: 22% (national corporate tax) + 2.2% (local income tax) = 24.2% total.
- Threshold: Applies to exchanges/companies with annual revenues exceeding 200 billion KRW (~$1.87 million).
- Enforcement: Aligns with existing Korean tax laws for high-revenue businesses.
Background: AML Investigation Findings
The government’s investigation revealed a 36-fold increase in commissions from virtual accounts linked to crypto exchanges:
- 2016: 61 million KRW (~$57,340)
- 2017: 2.2 billion KRW (~$2 million)
Impact on Major Exchanges
Bithumb, South Korea’s largest exchange with $2.85 billion in daily trading volume (as of reporting), reported **317.6 billion KRW (~$295.4 million) in 2022 trading volume. Under the new tax structure, it would owe approximately 60 million KRW** in taxes.
Security Concerns and Regulatory Crackdown
- Past Breaches: Bithumb lost $7 million in a 2017 hack (primarily Bitcoin and Ethereum).
Recent Measures:
- Ban on anonymous virtual accounts.
- Freeze on new virtual account registrations.
- Restrictions on minors and foreign traders.
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Public Backlash and Petitions
A citizen-led petition demanding the reversal of these regulations garnered 200,000 signatures, compelling an official government response.
FAQs
1. Who must pay the 24.2% crypto tax in South Korea?
Exchanges and businesses with annual revenues exceeding 200 billion KRW (~$1.87 million).
2. How does South Korea’s crypto tax rate compare globally?
At 24.2%, it’s higher than some jurisdictions (e.g., Germany’s ~0% for long-term holdings) but lower than others (e.g., short-term U.S. gains taxed up to 37%).
3. What triggered the new tax policy?
AML findings showed suspicious transaction growth tied to crypto exchange-linked accounts.
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