According to the Financial Services Commission (FSC) Vice Chairman Doh Kyu-sang, the government can levy taxes in accordance with the current legislation. In “Act on the Specified Financial Transaction Information”, income from trading virtual assets (VA) is classified as “other”.
Earlier, the agency, with reference to the Financial Action Task Force (FATF) rules, argued about NFTs. Thus, on October 28, FATF published revised guidelines for the crypto industry. Moreover, according to the document, NFTs are not subject to the recommendations of FATF. If using them as collectibles, and not for payments and investments. According to the publication, the finance ministry held the same opinion.
Changing the position may cause confusion
Experts fear that changing the position of the FSC may cause confusion in the market regarding taxation. Head of Blockchain Research Center at Dongguk University, Park Sung-joon said; “In the situation where the financial authorities are contradicting each other, it is confusing for market players of virtual assets to know whether they must pay taxes or not.”
From January 1, 2022, a capital gains tax on transactions with virtual assets will be introduced in the country. The rate will be 20% of the income exceeding 2.5 million won (~$2105).
According to the expert, if the authorities have decided to levy a similar tax on NFT, they should apply norms to it, as for real art assets. People selling physical works of art pay 22% of income over 60 million won (~$50,520), he noted.
Toburo Democratic Party proposal
Recall that previously, the ruling Toburo Democratic Party in South Korea proposed to postpone the introduction of a tax. Noh Woong-rae, a member of the National Assembly, said that the introduction of the tax is not technically prepared. According to him, the ministry’s policy on this issue is “administration that ignores reality.”
For example, it is extremely difficult for fiscal departments to obtain tax data on transactions on foreign exchanges or P2P transactions, the parliamentarian believes. This can create “blind spots”, which instead of fair taxation, will promote tax evasion and undermine confidence in the government, he noted.
The bill was under consideration by the relevant committee of the Parliament. According to the politician, the party expected its adoption before October 1.