South Korea Minister of Finance and Economy Hong Nam-ki has assured NFT users of no taxation, following rumors that agencies will tax income from the digital space. During Wednesday’s National Assembly’s annual review, Hong Nam-Ki cleared the uncertainties surrounding crypto Taxation, with the minister that NFTs are exempted from being taxed, but digital asset transactions would be starting from January 1, 2022.
When asked if NFTs are classified as virtual assets, the minister responded that they were still discussing the topic, but added that NFTs aren’t classified as digital assets according to income tax law. The news implies that the government would tax all profits amassed from dealing in cryptocurrencies.
NFTs Have Been on the Rise Since 2019
Over the last two years, the growth of NFTs in the digital space has been tremendous and surprising, especially amongst South Koreans. Although the main focus of NFTs is to create and trade digital artworks and put money into the pockets of the original artists, some people have capitalized on the space to sell unauthorized artworks. Thus infringing the copyrights of the real owners and profiting greatly from it.
However, many people have made some huge gains legitimately through the sector. Beeple’s “Everyday: The First 5,000 Days” artwork was sold for more than $69M. Ground X, a subsidiary of South Korean-based internet company Kakao, opened an NFT marketplace called Klip Drops. The marketplace allowed artists to auction their digital artworks for its native token KLAY.
Outside the Asian country, music artists and gamers in the US are making good use of the NFT space. Music artists like Shawn Mendez have sold digital artworks worth millions. However, the IRS is considering slamming a 28% tax on profits gained from trading NFTs. According to Shaun Hunley, a Georgia-based attorney, taxation will affect both the persons creating the NFTs and those trading them.
For the IRS to develop an effective taxation system, it must comprehend the different manufacturing and trading NFTs methods. At the moment, the IRS is focused on the crypto space and not NFTs. According to the attorney, it may take years for the revenue agency to form a framework that will enforce taxation on NFT creators and traders.
In Australia, the taxation system for NFTs is different. Unlike the IRS that aims to place a 28% tax on trading profits, Australia taxes capital gains. Non-fungible tokens are treated like cryptos, therefore follow the same tax laws.
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