By Shelly Melancon (Switzerland)
South Korea’s financial regulatory body, the Financial Services Commission (FSC), has informed citizens that the country will start collecting taxes on Non-fungible Tokens by next year. The Korean Herald reported that the new law would take 20% of the profit from cryptocurrencies and NFTs valued above $2,102. The law is to be enforceable from the beginning of next year.
The vice-chairman of the FSC, Doh Kyu-sang, clarified that not all NFTs are to be classified as digital assets. Doh said only those that fit the law’s definition would be subject to further taxation. He noted that tax authorities would be responsible for categorizing NFTs for taxation.
NFTs Classified As Digital Assets
The new development takes a shift from the previous statement from the organization just last month. The organization had informed the public last month that NFTs will not be classified as digital assets and, as such, not be subject to regulation. The perspective of regulators now seems to have taken a turn as they now express their desire to tax it like cryptocurrency.
The regulators had planned to start the taxation of profits made from cryptocurrencies the following year. Political pressure at the moment may see the timeline delayed. The regulators in South Korea continue to formulate policies to regulate the cryptocurrency market to discourage money laundering. Taxation of these new assets is beginning to take hold around the world.
Also read:Taxation Of Digital Assets In Other Countries
The United States, in the last couple of weeks, have passed cryptocurrency regulations within their infrastructure bill. The new bill includes modalities on tax reporting and payment. The bill will also see NFTs are subject to regulations when it becomes effective.
Certified Public Accountant James Yochum used the microblogging platform Twitter to demonstrate what NFT buyers or holders should expect. He said those involved in minting or selling NFTs have to familiarize themselves with form 8300. They will also have to obtain the social security numbers and other identification from those who purchase NFTs.
Yochum reiterates that the bill requires transactions valued at $10,000 are subject to reports to the IRS. The above provision covers NFTs also. If one fails to report such transactions within 15 days, one will have to face felony charges.
India is another country that is considering the taxation of cryptocurrencies and NFTs. The government has seen an explosion of the industry in the country, including in NFTs. It had expressed concerns that young investors were being targeted and may lose their money.
Celebrities in the country have lent their image and voices to the fast-rising markets like many celebrities and athletes in the west. These concerns at some point led the government to contemplate placing a ban on the asset class. However, there are talks that the government is creating a framework to tax digital assets.
The trend of cryptocurrency and related assets taxation may well continue, with South Korea being the latest. The Korea Herald reported that exchanges in August evaluated by the FSC all failed to meet requirements for registration. Governments and regulators will continue to seek a balance between regulations and innovation in their policies.
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