This country might be the first to tax NFTsAuthor: Nishu November 24, 2021
Crypto taxation has become a key part of the discussion in the regulatory debate. On the one hand, some countries are imposing capital gain taxes based on existing rules while on the other, a few nations have framed new tax regulations on crypto transactions.
South Korea is one such nation currently leading the regulatory demography with its crypto taxation rules. It has imposed a 30% tax on crypto transactions which is set to come into effect from the next year. Now, the nation is on the verge of becoming the first country to impose taxation on non-fungible tokens (NFTs).
FSA Plan to Tax NFTs Under “Other Income”
As per a report published in Korea Herald, the South Korean financial regulator Financial Services Commission (FSC) has outlined plans to introduce a tax system for NFTs as well. Doh Kyu-sang, the Vice Chairman of FSC revealed that the regulatory body is planning to bring gains from NFTs sales under the current Act on the Specified Financial Transaction Information.
Under the Specified Financial Transaction Information rule, any gains made from the sale and purchase of virtual assets qualify as “other income” and are subject to taxation.
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.
Finance Ministry Doesn’t Agree With FSA
The Finance Ministry, however, disagrees with FSA’s evaluation of NFTs and believes it’s still controversial to categorise them as virtual assets. Finance Minister Hong Nam-ki had said, “(I think) NFTs do not belong to virtual assets yet.”
The difference in opinion on NFTs between the regulatory body and the finance ministry could create a lot of market confusion which is not good for the ecosystem.
South Korea has emerged as one of the most regulatory sound crypto ecosystems after its recent implementation of AML guidelines. The new regulations pushed out hundreds of unregistered mainly comprising of small and medium-sized crypto exchanges, as they failed to fulfil the criteria of registration.