South Korea reportedly imposed a 20% tax on cryptocurrency trading profits after an amendment of their tax law was announced today. The limit is set at $2000 (2,5 million Won). Traders with profits more than this amount will be taxed from October 1st, 2021. Any profits less than $2000 won't be charged.
According to the same reports, the tax applies to everyone trading on South Korean exchanges, even if they are not Korean nationals or not based in Korea. The exchanges will deduct the tax from trading transactions that end with profit and pay the amount to the Korean tax services.
South Korea has already recognized Bitcoin and other digital currencies as a form of money but with this move, they create a legal framework to tax cryptocurrency trading in parallel with the US and other countries legislation.
A 20% taxation is extreme and can result in less trading volumes from the South Korean Exchanges. The only positive I see from this decision is that the new tax law will be activated after 14 months, so the effect in Korean trading volumes won't be immediate. The news was met without any major price changes for Bitcoin and other cryptocurrencies but certainly, this is not a crypto favorable regulation coming from one of the world's major economies. In the past crypto taxation in the US caused many traders to pay more than they earned and reduced trading and interest in cryptocurrencies.
Meanwhile, the Korean government decided to reduce the Stock Exchange transaction fees from 0,25% to 0,15% in 2023 which will favor Korean company stocks.