The South Korean National Tax Service will require residents to declare substantial offshore cryptocurrency savings beginning in January 2022. This will occur as part of the broadening of the rules for reporting foreign asset ownership.
The rules will apply to South Koreans who have more than 500 million won (about $450,000) in digital currency in their accounts at the end of each month. Previously, people who placed a deposit with a foreign bank, possessed stocks, funds, derivatives, bonds, or insurance products were subject to a similar requirement.
According to South Korea’s tax department’s plans, the first reporting of citizens on offshore crypto assets is expected in June 2023. Those who choose to remain silent about their situation will almost certainly face a fine of 10% to 20% of the amount of hidden or intentionally reduced crypto assets. Criminal proceedings against the holder may be initiated if the value of the assets reaches 5 billion won (about $4.5 million).
To combat money laundering and cryptocurrency fraud, regulatory procedures are being tightened. Local crypto sector leaders were particularly hard hit, as they were required to register with regulators as virtual asset service providers by September of this year. However, many of them are unsure that they will be able to pass the audit with the financial control authorities because the department did not set clear requirements, and Korean banks are not ready to engage with crypto enterprises.
Remember that, beginning January 1, 2022, the South Korean government will impose an income tax on digital currency trading, requiring residents to pay 20% of their profit from trading crypto-assets during the year if it exceeds 2.5 million won ($2,000). At the same time, a national poll found that 54 percent of citizens support imposing taxes on cryptocurrency trading.