South Korea may impose tax on NFT and DeFi investors

NFT and DeFi investors in South Korea may soon be taxed as the country may include digital assets under the anti-money laundering bill. Experts in this field think that as cryptocurrencies and other forms of digital assets, including non-fungible tokens, keep growing, the government may start to regulate them now fully.

According to The Korea Herald, as the market for NFTs and DeFi is developing at a fast pace, the government may move to impose a tax on profits gained from digital assets. Then again, industry observers pointed out that the Korean government still needs time to be able to implement a fair and transparent taxation plan for decentralized finances and digital assets.

It was already revealed last week that the country’s Ministry of Finance is considering the imposition of tax on DeFi products, but experts voiced concerns as this seems to be a rather hasty move from the government. In the proposed scheme, the officials will implement a 25% withholding tax rate plus a basic tax rate of six to 45% for income worth over ₩20 million.

Moreover, for NFTs that include digital assets in music and art, the ministry said these should also be subjected to taxation. “We are weighing whether NFTs fall into the virtual-asset category because there is a demand to include NFTs among virtual assets,” Hong Nam Ki, Korea’s minister of finance, said in a statement.

It was reported that the government’s plan to apply tax on NFT and DeFi products is backed by the Financial Action Task Force’s updated guidelines on virtual asset service providers. The FATF is an intergovernmental agency that monitors anti-money laundering.

“If an NFT is regarded as a virtual asset, income from the transfer of NFTs will be taxed from next year, but it would not be fair considering taxes that incur when transferring game items and artworks,” Park Kyung-hee, a lawyer, said with regards to FATF’s view that NFTs and DeFi may fall under the country’s anti-money laundering law which is the Act on Reporting and Using Specified Financial Transaction Information.

In any case, last month, South Korea was still undecided on NFT tax. Crypto Slate reported that during a review, the finance minister said that the government was set to apply a tax levy on all gains from crypto-related transactions. Minister Hong said that the talks about this issue are still ongoing, and he emphasized that NFTs are not covered in the newly proposed income tax law. Finally, it is yet to see what the final decision will be regarding the taxing of digital assets.