The Ministry of Strategy and Finance of the Republic of Korea has interpreted the tax law in such a way that the assignment of new shares via airdrops (the transfer of virtual assets to a recipient) may also be deemed a gift by the government.
Cryptocurrency Incentives
The Ministry of Strategy and Finance reported that in response to an inquiry regarding the interpretation of tax laws, the government has responded.
In a recent instance, a virtual asset issuer provided a virtual asset of the same kind or a different kind to a member who owned a particular virtual asset if the transaction was a gift transaction. As per the Inheritance and Gift Tax Act, the free transfer of assets is regarded as a gift.
It is very likely that the recipient of the virtual asset in this situation will be required to pay a gift tax at the end of the year.
Among the free transactions of virtual assets include airdrops, in which net assets are given to individuals who own specific virtual assets in accordance with the investment ratio that was specified, and hard forks through which other virtual assets are created through a new blockchain and in which net assets are deposited into a blockchain network. Basically, there is staking, which entails the payment of a reward based on virtual assets.
It is possible that a virtual asset investor may be subject to the gift tax if, for example, they receive a payment in exchange for receiving a virtual asset as an airdrop reward.
A tax on capital gains arising from the ownership of virtual assets is scheduled to be introduced by the tax authorities in 2025, but the gift of these assets is still subject to taxation.
Quite simply, the gift tax is a tax on all property and real estate rights that have the ability to be converted into money and on all objects of economic value that are capable of being converted into money.
Taxes on gifts must be paid by the recipient within three months from the end of the month in which the gift was made, and the amount of the gift tax is levied at an amount ranging from 10-50%, depending on the year of the gift.
The government, however, holds the position that it is for each individual case to determine whether a gift tax should be imposed, depending on the circumstances.
The Ministry of Strategy and Finance said:
“Whether a specific virtual asset transaction is subject to gift tax or not is a matter to be determined in consideration of the transaction situation, such as whether it is a consideration or whether actual property and profits are transferred.”
