South Korean crypto holders have been warned to declare their overseas crypto exchange holdings or face potential tax consequences. This warning was issued by Kim Dae-kyung, a tax accountant at the Hana Bank Asset Management group’s Asset Management Consulting Center. Currently, crypto trading profits are not taxed in South Korea if they are done on domestic platforms. However, starting next year, traders will be required to file capital gains declarations and pay tax on profits over a threshold of around $2,100. Failure to declare overseas crypto assets on tax declarations could be considered a violation of tax law.
Kim Dae-kyung emphasized the importance of declaring overseas financial assets, including crypto holdings, by the end of June. These declarations are mandatory under the terms of the Income Tax Act, which requires South Korean residents to report overseas financial accounts if the total balance exceeds a certain amount. Previously, tax bodies had limited means of identifying overseas assets, but since 2014, South Korean tax authorities have been exchanging data with international counterparts. This means that the National Tax Service now has access to an individual’s overseas account information.
Failure to report overseas crypto holdings can result in fines or even criminal prosecution. Kim Dae-kyung highlighted the potential consequences, stating that fines for non-reporting can amount to approximately 10-20% of the wallet balance. Additionally, traders who fail to report wallets containing over $3.6 million worth of assets could face criminal charges. In response to the increasing global regulation of crypto exchanges, South Korean lawmakers added crypto-specific clauses to the tax code in December 2020. These clauses cover accounts opened overseas for the purpose of trading cryptoassets.
President Yoon Suk-yeol has previously pledged to raise the tax threshold for domestic crypto trading profits to around $41,000. This indicates a shift towards greater regulation and oversight of crypto trading in South Korea. The country’s tax authorities are cracking down on undeclared overseas assets, including crypto holdings, and failure to comply with reporting requirements could lead to significant financial penalties and legal consequences. With the increasing exchange of data between international tax authorities, crypto traders are urged to ensure that they accurately report all overseas financial accounts to avoid potential tax issues in the future.
