Korean lawmakers plan to impose taxes on NFTs after classifying them as virtual assets.
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South Korea’s Financial Services Commission, or FSC, announced Tuesday that nonfungible tokens, or NFTs, will be taxed starting next year. According to The Korea Herald, this tax law amendment would impose a 20% tax on income from virtual assets that exceed 2.5 million won ($2,102) as of Jan. 1, 2022.
The FSC’s vice chairman Doh Kyu-sang specified that only some NFTs would be categorized as virtual assets and therefore subject to “other income” taxes, referring to those used for investment or payment on a large scale. Tax authorities are in charge of defining the full scope of taxable NFTs.
This announcement, however, differs from last month’s stance when the FSC had issued a public statement reaffirming that NFTs are not virtual assets and would not be regulated. Korean lawmakers now appear to view NFTs in the same taxable light as cryptocurrencies. A planned tax on cryptocurrency gains was set to take effect on January 1, 2022, but may now be delayed due to political pushback.
South Korea has recently taken many measures to regulate the crypto market, in a targeted effort against money laundering. According to The Korea Herald, all 25 exchanges reviewed according to the August guidelines were found to have “inadequate levels of preparedness” with none of them meeting all the registration requirements.
As the NFT marketplace rapidly expands in South Korea and the world, the debate over regulation versus innovation remains controversial.