New Changes in Cryptocurrency Valuation for Inheritance and Gift Tax in Korea

Starting from 2022, significant changes have been introduced to the valuation method for cryptocurrencies when they are inherited or gifted under the "Inheritance and Gift Tax Act" in Korea. The updated regulations aim to standardize the valuation process and enhance transparency. Here's a detailed look at the new rules, including the designated virtual asset service providers (VASPs) and how the valuation process works.

📌 Overview of the New Cryptocurrency Valuation Rules

Under the new rules, the valuation of inherited or gifted cryptocurrencies will follow a revised methodology effective from January 1, 2022. The National Tax Service (NTS) has also designated specific VASPs for property valuation purposes.

✅ Designated Virtual Asset Service Providers (VASPs)

The NTS has announced the following cryptocurrency exchanges as designated VASPs for inheritance and gift tax valuation:

Dunamu Co., Ltd. (Upbit)
Bithumb Korea Co., Ltd. (Bithumb)
Korbit Co., Ltd. (Korbit)
Coinone Co., Ltd. (Coinone)

Criteria for Designation

These exchanges meet the following requirements:

Information Security Certification (ISMS): Ensures high security standards.
Real-Name Bank Accounts: Secured in compliance with the Act on Reporting and Use of Certain Financial Transaction Information.
Reporting Approval: Registered and approved by the Financial Intelligence Unit (FIU).

As of December 9, 2021, the number of cryptocurrencies traded on these exchanges is as follows:

Upbit: 160 types
Bithumb: 184 types
Korbit: 74 types
Coinone: 192 types

📊 New Valuation Method for Cryptocurrencies

Previously, the value of inherited or gifted cryptocurrencies was determined based on the market price on the date of inheritance or gifting, as per the "Inheritance and Gift Tax Act."

From January 1, 2022, the valuation method has changed:

Cryptocurrencies traded on designated VASPs will be valued based on the average daily price for the one month before and after the date of inheritance or gifting.
This average daily price is calculated using the values published by the designated VASP.

Cryptocurrencies Not Traded on Designated VASPs

For cryptocurrencies traded on non-designated exchanges, valuation will rely on:

The average daily price or the closing price published by the respective exchange.
Any other reasonable valuation method recognized by the authorities.

🖥️ Enhanced Convenience Through Hometax

To simplify the calculation process for taxpayers, the NTS plans to introduce a new feature in March 2022 on its Hometax platform. This feature will allow users to:

Input the type of cryptocurrency.
Specify the valuation reference date.
Retrieve the cryptocurrency's valuation under the "Inheritance and Gift Tax Act."

📝 Key Deadlines for Tax Filing and Payment

The deadlines for reporting and paying inheritance or gift tax on cryptocurrencies remain consistent with general tax rules:

Inheritance Tax:
- Due within 6 months from the end of the month in which the inheritance occurred.
Gift Tax:
- Due within 3 months from the end of the month in which the gift was received.

🚨 Important Considerations

Fair Valuation: Ensure you use the designated VASP's valuation methods for accurate reporting.
Non-Compliance Risks: Failure to adhere to the new rules could lead to penalties or disputes.
Documentation: Maintain thorough records of transactions and valuations for audit purposes.

🔑 Conclusion

The updated cryptocurrency valuation method for inheritance and gift tax reflects Korea’s commitment to standardizing tax processes in the digital asset space. By leveraging the designated VASPs and the upcoming Hometax tools, taxpayers can ensure accurate valuation and compliance. Whether you are inheriting or gifting virtual assets, understanding these new rules is crucial for a smooth tax filing process.

Frequently Asked Questions (FAQs)

Q1: Which exchanges are considered for cryptocurrency valuation? The NTS-designated exchanges are Upbit, Bithumb, Korbit, and Coinone.

Q2: How is the average daily price calculated? It’s based on the daily average prices published by the exchange over one month before and after the reference date.

Q3: What happens if the cryptocurrency is not traded on a designated VASP? You may use the valuation from the non-designated exchange or any other reasonable and recognized method.