20% tax on bitcoin profit from next year… 1.5 million won tax if 10 million won earned

Input 2021.02.22 12:56 | Revision 2021.02.22 12:57

If the market capitalization of bitcoin exceeds $1 trillion (approximately 1100 trillion won) and the annual income generated by buying, selling, or lending virtual assets such as bitcoin exceeds 2.5 million won from next year, you will have to pay 20% of the excess as tax. Also, when handing down virtual assets to children, you must pay an inheritance tax of up to 50%.

According to the Ministry of Strategy and Finance on the 22nd, the government will classify income generated from transferring or lending virtual assets as other income starting next year and tax it separately at a tax rate of 20%. The basic deduction amount is 2.5 million won.

For example, a person who made a profit of 10 million won with bitcoin next year must subtract 2.5 million won from the profit and pay 1.5 million won, 20% of the 7.5 million won, as tax. However, this is an amount excluding transaction fees, and the actual tax is calculated as the net income amount (total income-necessary expenses) minus necessary expenses such as asset acquisition value and transaction fees.

When calculating the necessary expenses, the first-in-first-out method, which is regarded as sequentially transferred from the assets purchased first, is applied. For example, if an investor buys a virtual asset for KRW 1 million, KRW 1.5 million, and KRW 2 million in installments and then sells one for KRW 5 million, the acquisition value of the asset is calculated as the first acquisition value of KRW 1 million.

In this case, it is calculated that the investor has earned 4 million won (excluding transaction fees) by subtracting the asset acquisition price of 1 million won from the income of 5 million won. Here, a basic deduction of 2.5 million won is applied, and as a result, tax is paid on the profit of 1.5 million won. If the asset is then sold again, this time, 1.5 million won is regarded as the acquisition amount.

In the case of currently held virtual assets, tax is not levied on the price increase before taxation is enforced.

The government introduced the agenda acquisition price for this purpose. It allows investors to pay taxes to the advantage of the actual acquisition price or the market price at the end of this year.

For example, if the actual acquisition price of a virtual asset held by an investor is 50 million won and the market price is 100 million won at the end of this year, it means that it will be regarded as acquiring the asset at 100 million won. Conversely, if the market price of the relevant asset is 30 million won as of the end of this year, it is taxed based on the actual acquisition price of 50 million won.

The market price at the end of this year is calculated as the average of the prices announced by the virtual asset providers announced by the Commissioner of the National Tax Service as of 0:00 on January 1 of next year.

Domestic residents must report their investment income for the previous year and pay taxes in May every year. At this time, the total income and losses from various virtual assets for one year are added and tax is applied.

In addition, when a virtual asset is not sold and inherited or gifted, tax is also charged. The taxable asset price is calculated as the average daily average price for one month before and after the date of inheritance and donation.