Korea to Start Taxing Crypto Gifts and Inheritances in 2022

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The Korean National Tax Service has announced that gifted or inherited crypto assets will be taxed under existing provisions, at a rate of between 10 and 50 percent, depending on their value. 

Korea to Tax Crypto Gifts and Inheritance 

Korean citizens will have to pay a new tax on crypto from 2022.

Local news agencies reported Tuesday that the Korean National Tax Service will levy a new crypto tax in 2022 targeting assets received as a gift or inheritance. 

Under the new provisions, crypto gifts and inheritances will be taxed in line with other gifted or inherited assets at a rate of between 10 and 50 percent, depending on their total value. Authorities state that the average daily price measured one month before and after the date of transfer will be used to calculate the correct amount of tax to be paid. 

The National Tax Service’s announcement listed four virtual asset providers—Dunamu, Bithumb Korea, Korbit, and Coinone—that will need to enforce the new tax provisions in the next year. 

This year, crypto regulations in Korea have tightened, but not without some pushback. At the start of December, lawmakers voted to push back the introduction of a more general 20% tax on crypto gains over the threshold of 2.5 million KRW ($2,099). The crypto gains tax is now set to come into effect in 2023.

Elsewhere, Korean crypto exchanges are changing their policies to help them comply with the new regulations surrounding digital assets. Earlier this week, the country’s third-largest exchange, Coinone, announced plans to block withdrawals to unverified external wallets as part of its efforts to crack down on illegal crypto activities such as money laundering. 

Disclosure: At the time of writing this feature, the author owned ETH and several other cryptocurrencies. 

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Coinone will stop withdrawals to unverified external wallets

South Korean crypto exchange Coinone has announced it plans to no longer allow withdrawals of tokens to unverified external wallets starting in January.

In a Wednesday announcement, Coinone said users would have from Dec. 30 to Jan. 23 to register their external wallets at the exchange, after which time it would restrict withdrawals. The exchange specified that crypto users could only register their own wallets, and the verification process “may take some time” and could change in the future.

According to Coinone, it planned to verify users’ names and resident registration numbers — issued to all residents of South Korea — to ensure crypto transactions were “not used for illegal activities such as money laundering.” Customers at the exchange likely won’t be able to withdraw funds to wallets without Know Your Customer, or KYC, safeguards. This restriction also applies to the popular hardware wallet Ledger.

In March, the South Korean government implemented a previously passed bill that requires local crypto exchanges to meet requirements for a real-name account and ISMS authentication, as well as report on their operations within six months. Crypto users in the country will also see the implementation of a tax rule scheduled to go into effect in January — the rule would impose capital gains taxes on all crypto trading profits of more than roughly $2,300.

Related: 30-somethings led crypto purchases at South Korean exchanges in 2021

Many exchanges, including Bithumb, have since announced restrictions and stronger KYC and Anti-Money Laundering, or AML, checks in response to Korean lawmakers’ push to regulate crypto. However, Coinone will likely still accept wallets offered by exchanges already in compliance with KYC checks, which would include those from FTX and Binance.