South Korea’s FSC Considers Taxing Non-Fungible Tokens (NFTs)

South Korea’s financial watchdog is considering taxing non-fungible tokens (NFTs) gains, local news outlet the Korea Herald reports today.

According to Doh Kyu-sang, Korea’s Financial Service Commission Vice Chairman noted that the government could tax NFT gains under the current act of Specified Financial Transaction Information.

The Specified Financial Transaction Information rule states that any income earned from buying and selling virtual assets is categorized under other incomes, which according to established rules, are subject to taxation.

Contradicting Views on NFT Taxation

Notably, the FSC’s view about NFT taxation differs from that of the finance ministry. Hong Nam-ki, South Korea’s finance minister noted in last month’s parliamentary audit session that the ministry is still trying to determine whether NFTs should be classed as virtual assets, which could see gains from the asset class subject to taxation.

However, in his opinion, Nam-ki said he does not believe NFTs are virtual assets.

“[I think] NFTs do not belong to virtual assets yet,” Hong said.

Commenting on the diverse views from the FSC and finance ministry on the taxation of NFTs, experts fear that the contradicting views from both regulatory agencies may confuse market participants about whether or not they should pay taxes.

“In the situation where the financial authorities are contradicting each other, it is confusing for market players of virtual assets to know whether they must pay taxes or not,” Park Sung-joon, head of the Blockchain Research Center at Dongguk University, said.

Park stated that should both regulatory agencies agree on imposing taxes on NFTs, they should impose the same tax rates similar to what is levied on real assets.

South Korea’s Crypto Tax

As reported, the South Korean government is planning to impose a 20% tax levy on profits made from cryptocurrencies.  The country noted that the tax levy will apply to crypto gains of 2.5 million won ($2,125) made over one year.

Despite deliberating on the rule since 2019, the government has postponed the implementation for several reasons, including as part of efforts to woo young voters into supporting the ruling party in next year’s election.

The crypto tax rules may reportedly be implemented in 2023 after the January 2022 presidential election. However, there has been no official announcement to back up that claim.