South Korea moves forward with its 20% crypto income tax

South Korea has been making headlines for quite some time due to its plans to charge a 20% tax on gains generated from trading and transacting digital currencies. Now, the plans are being finalized, and the cost of trading crypto is waiting to become implemented.

According to recent reports, the South Korean Ministry of Economy and Finance made amends to the tax code earlier today. It stated that anyone who achieves an annual income of over 2.5 million won (approximately $2,000) by trading digital currencies will have to pay a 20% tax.

However, this only applies to those who exceed the amount of 2.5 million won per year. Anyone who achieves a lesser income than that while trading cryptocurrencies will not be subject to the country’s new tax.

When will the new tax come into effect?

Another thing to note is that the new tax will not be implemented just yet. It is still waiting for parliamentary approval.

Once approved, the tax will come into effect from October 1st, 2021. In other words, there is still more than a year before the tax actually comes into effect.

South Korea has been trying to make changes to its tax code for over half a year now. First reports of its plans to introduce the 20% tax emerged in January of this year.

For this purpose, it even classified digital currencies-based gains as ‘other income.’ This puts income gained by trading cryptocurrencies in the same category as money one may earn from lotteries. In other words, crypto income is not seen as a form of capital gains anymore.

The classification has been finalized, and the country is ready to take the next step.

The move is making the South Korean approach to taxing crypto similar to that in Japan, which already treats income made from digital coins as a form of miscellaneous income.