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The Cost of Gift Tax on Crypto Airdrops Will Be High for South Koreans

The Cost of Gift Tax

According to the most recent sources, the Ministry of Strategy and Finance is planning to impose a new gift tax on cryptocurrency airdrops. Earlier today, on August 22, the ministry was responding to a question regarding the application of the gift tax to freely transferable cryptocurrency.

According to the Inheritance and Gift Tax Act, the free transfer of assets qualifies as a "gift," according to a Ministry of Finance official. In this scenario, the third party to whom the virtual asset is given away without charge will be subject to gift tax.

In the cryptocurrency world, a practise known as "airdrops" rewards platform users who hold their native digital assets. In particular, airdrops take place when a blockchain is hardforked into a new one or when virtual assets are deposited into a blockchain network. Staking in cryptocurrencies is another type of cryptocurrency compensation that might be taxed as a gift.

Crypto Gift Taxes Will Range from 10 to 50%

According to a local news outlet in South Korea that cited tax authorities, taxes on capital gains from virtual assets will start in 2025. Giving away virtual goods will still be governed by present laws.

South Korea's gift tax is applicable to all items with economic value that can be converted to cash. Within three months of receiving them, the recipient who must pay gift tax will need to file a gift tax return. This might represent anywhere from 10 to 50% of the overall amount of gifts given. "In the case of a free transfer of virtual assets, the principle is, of course, the subject of taxation," a tax industry official stated.

It must be strengthened with new legislation in order to exempt airdrops from gift tax.

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