South Korea financial authority rules that NFTs are taxable

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 USD) 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, August guidelines found all 25 exchanges reviewed to have “inadequate levels of preparedness” with none of them meeting all the registration requirements.

Related: South Korea’s crypto regulation is now expanding to foreign businesses

As the NFT marketplace rapidly expands in South Korea and the world, the debate over regulation versus innovation remains controversial.

NFTs and US taxes: What you should know   April 24, 2021
South Korean National Assembly to Discuss Crypto Transaction Transparency   July 9, 2020
South Korea Is Exploring New Crypto Tax Laws   May 27, 2020
3 things every NFT investor should know to avoid a tax nightmare   Feb. 5, 2022
Germany outlines favorable tax guidelines, gains on BTC and ETH sold after a year tax-free   May 12, 2022