South Koreans Told to Declare Overseas Crypto Holdings
South Koreans are not currently taxed on crypto profits from trading on domestic platforms, but that's about to change
April 30, 2024 04:18 AM
Reading time: 1 minute, 42 seconds
TL;DR South Korean crypto holders are warned to declare their overseas crypto exchange holdings to avoid potential hefty fines and legal issues. With tax laws changing next year, failure to report could lead to significant penalties. The National Tax Service can now access information on individuals' overseas accounts, making non-disclosure riskier than ever.
South Korean crypto asset holders have been issued a stern warning: declare your overseas crypto exchange holdings or face a potential "tax bombshell." This warning was published by Kim Dae-kyung, a tax expert at Hana Bank Asset Management group, highlighting the urgency for South Korean residents to comply with the nation's tax laws regarding overseas assets.
Overseas Assets Under Scrutiny
Kim Dae-kyung explained that while crypto trading profits are currently not taxed if the trading occurs on domestic platforms, this is set to change next year. From then, traders will need to file capital gains declarations for profits exceeding approximately $2,100.
However, the more pressing concern is for those holding crypto assets on platforms outside South Korea. These are already considered "overseas assets," and failing to declare them could result in violations of tax laws.
The deadline to report these overseas financial accounts is by the end of June this year, as mandated by the Income Tax Act. The act requires South Korean residents to report if the total balance of their overseas financial institution accounts exceeds $363,000. Failure to do so could attract significant fines, ranging from 10-20% of the undeclared wallet balance, and potentially lead to criminal prosecution for balances exceeding $3.6 million.
Data Sharing Increases Transparency
Until recently, South Korean tax authorities relied on voluntary declarations to track overseas assets. However, since 2014, an increase in data sharing with tax bodies in the USA and other OECD nations has significantly boosted their ability to identify undeclared assets. This transparency extends to crypto exchanges and token wallets, with international exchanges now required to share data in many jurisdictions.
"As such, Kim wrote that the National Tax Service can now access all of 'an individual's overseas account information.'"
This increased data sharing has made it more challenging for individuals to avoid reporting their overseas assets. With the deadline for reporting fast approaching, South Korean crypto holders are urged to take immediate action to ensure compliance and avoid the hefty fines and legal complications that could arise from non-disclosure.
