South Korea’s financial regulators to enforce tax on NFTs

South Korea’s Financial Services Commission (FSC) earlier disclosed that nonfungible tokens (NFTs), will be taxed beginning from 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) as of Jan. 1, 2022.

The FSC’s vice chairman Doh Kyu-sang stipulated 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.

This announcement differs from the FSC stance last month, when they 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.

It has imposed a 30% tax on crypto transactions which is set to come into effect on the above date.

South Korea has been taking measures of recent to regulate the crypto market, in a targeted effort against money laundering.

According to The Korea Herald, all 25 exchanges reviewed according to the August guidelines were found to have “inadequate levels of preparedness” with none of them meeting all the registration requirements.

The Finance Ministry, however, disagrees with FSA’s evaluation of NFTs and believes it’s still controversial to categorize them as virtual assets. Finance Minister Hong Nam-ki had said, “[I think] NFTs do not belong to virtual assets yet.”

South Korea has emerged as one of the most regulatory sound crypto ecosystems after its recent implementation of AML guidelines.