The South Korean Ministry of Strategy and Finance has made a new taxation gift on cryptocurrency airdrops. The authorities are levying the tax on third parties who get the cryptocurrency transfers free.
The country joined the list of nations to create laws to govern crypto assets’ applications and controls. In a global analysis, cryptocurrency taxation is getting the high side. This is because most governments want to reap from the trading and transfers characterizing several transactions with virtual assets.
According to reports by the ministry, the free transfer of virtual assets is categorized as a gift. The categorization is done under the Inheritance and Gift Tax Act.
The South Korean Ministry of Finance disclosed its plans early on August 22. This was during its response to a tax law interpretation for the freely movable digital asset. There has been a demand to ascertain if the authorities would implement the gift taxation law.
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The South Korean gift taxation law applies to all items of economic value which can be converted to fiat currency. The authorities set the gift tax between 10% to 50% of the total values of received gifts. Users with the obligation of paying gift tax are expected to file for the gift taxation within three months of getting them.
The tax arm stated that the subject of taxation for any gift of a digital asset is the principal value. It revealed that only the reinforcement of additional legislation could allow the exclusion of airdrops from gift tax.
Airdrop offers an opportunity for digital asset holders to receive rewards from a protocol in the form of the native crypto token. It usually occur during the period that an existing blockchain undergoes hard forking for the function of a new one.
Also, it can happen when depositing crypto assets to a blockchain network. A gift tax also applies to crypto staking, where customers receive rewards as digital assets.