South Korea’s tax agency pledges to strengthen digital asset tax evasion loopholes

South Korea’s tax agency, the National Tax Service (NTS), has pledged to crack down on people using digital assets and digital asset platforms to evade taxes.

According to a Korea Herald reporta NTS made this statement during the organization’s political discussion before the Strategy and Finance Committee of the National Assembly. During the briefing, the NTS explained that Koreans are increasingly looking to use digital assets, which are not levied in the country, to dodge paying taxes.

To do this, they relocate their wealth to tax havens and invest in digital assets. The agency pointed out that a hospital owner in Seoul owed KRW 2.7 billion ($2 million) in income tax.

The man, who resides in Seoul’s Gangnam district, insisted he had no income. NTS investigations, however, established that he had invested nearly $3 million in digital assets. He was forced to pay his tax deficit after the agency seized his digital asset account.

In another case, a person who should have paid KRW 1.2 billion ($918,973) in taxes on gains made on the sale of a KRW 4.8 billion ($3.6 million) property dollars) turned out to have invested all earnings in digital assets. The official added that such cases “impede justice in the marketplace as well as fairness in taxation.”

The NTS also investigates people using digital assets to evade inheritance and gift taxes, as well as online platforms moving their servers to tax havens to avoid paying income taxes for operating money-making businesses. e-commerce.

South Korea and the taxation of digital assets

South Korea has been pushing to introduce a comprehensive tax regime for digital assets since 2020. The law to impose a 20% digital asset income tax was due to take effect in 2021 but has suffered several delays.

The tax regime was pushed back to 2022, then 2023 and, most recently, 2025. The most recent postponement is influenced by the new presidential regime of Yoon Suk-yeol, who is determined to introduce taxes only after the adoption of comprehensive regulation for the asset class that lives up to its campaign promises.

Efforts to complete, enact and begin enforcing the Digital Assets Basic Law (DABA), which will regulate the market, have redoubled, especially since the collapse of the Terra LUNA ecosystem and UST tokens. The government has also formed an interim committee to monitor the market until the regulations come into force.

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Esther L. Steinbach