The FSC regulator in South Korea is planning on imposing taxes on NFTs after classifying them as virtual assets.
Differing opinions have arisen with most analysts saying that this could threaten the country’s NFT industry.
Regulatory bodies worldwide, including those in South Korea, have been inching closer into matters of cryptocurrency. Certain nations have imposed capital gain taxes based on existing rules, while others have framed completely new taxation rules for the relatively nascent industry. The US is one such region where digital assets are identified as property, and therefore liable to taxes.
In a new move, South Korea is now looking at being the first nation in the world to tax non-fungible tokens (NFTs). Already, the nation has imposed a 30 percent tax on crypto transactions – a rule that comes into effect starting 2022.
As the Korea Herald reports, the mushrooming NFT sector has now come under the interest of the Financial Services Commission (FSC). The regulator, according to its Vice-Chairman Doh Kyu-sang, plans to bring gains from NFT sales under the current Act on the Specified Financial Transaction Information. Per the Act, any gains made from buying and selling virtual assets qualify as “other income,” and are therefore taxable.
South Korea and NFTs
An excerpt of the report reads;
Owners of virtual assets, such as NFT artworks by a famous artist, are required by law to pay a 20% tax on any income that exceeds 2.5 million won ($2,102) from selling the assets,
And like most new taxation rules, South Korea’s latest has not come without resistance. The country’s Finance Ministery is at odds with the FSA’s evaluation of NFTs as virtual assets. Finance Minister Hong Nam-ki said;
[I think] NFTs do not belong to virtual assets yet.
These controversial opinions have the potential to generate great confusion in the nation’s NFT market, to its detriment.
Notably, South Korea is one of the Asian countries that has been making headlines in matters of crypto regulation, other than China. The nation has, however, not completely banned digital assets and their related endeavors like its northwestern neighbor. Its regulatory effects have also not been as stifling and as strongly market moving as China’s crypto announcements.
Regulation and crypto havens
Back in September, the nation required all crypto exchanges to register with the FSC as part of the anti-money laundering efforts. Towards the end of that month, many exchanges – mostly small and medium-sized, were forced to shut down due to non-compliance.
Amidst all these, certain nations in the world take pride in being crypto-friendly tax jurisdictions that support digital economies and technological innovation. They include Belarus, El Salvador, Malaysia, Malta, Portugal, and Bermuda. The latter is famous for being the first government in the world to accept fees and taxes in cryptocurrency.
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