South Korean recipients of airdrop tokens and prizes from the Bithumb crypto exchange between 2018 and 2021 are facing unexpected tax bills, totaling around $30 million. The National Tax Service (NTS) has ordered these customers to pay taxes on the giveaways, which has come as a surprise to many, as South Korea currently does not tax crypto-related profits. However, the NTS requires winners of events like airdrops to declare and pay taxes on their winnings, classifying them as “other income.” Bithumb has announced that it will cover the tax bills for its customers but plans to challenge the NTS’s decision to retrospectively tax its users on these prizes.
The NTS believes that Bithumb distributed approximately $61 million worth of assets to South Korean residents during the specified period, leading to tax bills for around 10,700 users. This is the first time that the NTS has taxed South Korean airdrop recipients, marking a significant development in the taxation of crypto-related activities in the country. Bithumb has stated that it considers the tokens and prizes given out through airdrop events as free gifts or sales benefits, which should be exempt from taxation. The exchange is filing a tax appeal against the NTS, arguing that its distributions should not be subject to taxes.
Legal experts suggest that the success of Bithumb’s appeal will depend on whether the NTS views the tokens as prizes or free gifts. The exchange may draw parallels with securities providers giving out stocks to new account holders, or shopping outlets offering gift certificates to high-spending customers, both of which are not subject to taxes. Appeals to the NTS can be time-consuming, with rulings taking several years to emerge, so the resolution of this tax dispute could be drawn out. Despite the legal challenges, Bithumb is pushing forward with its plans to become the first South Korean crypto exchange to go public on the nation’s stock exchange, indicating its confidence in the future of the industry.
The tax bills faced by South Korean recipients of Bithumb’s airdrop tokens and prizes highlight the changing landscape of crypto taxation in the country. As more individuals participate in crypto-related activities, including airdrops and promotions, clarity on tax implications becomes increasingly important. The NTS’s decision to retroactively tax airdrop recipients indicates a shift in the regulatory environment for the crypto industry in South Korea, which could have broader implications for users and exchanges in the country. Bithumb’s decision to challenge the tax bills on behalf of its customers demonstrates its commitment to protecting users and advocating for clarity in tax regulations.
It is essential for crypto users in South Korea and globally to stay informed about tax implications related to their activities in the digital asset space. As governments around the world, including South Korea, develop regulations and guidelines for taxing cryptocurrencies, users must be aware of their tax obligations to avoid unexpected bills or legal issues. The outcome of Bithumb’s appeal against the NTS’s decision could set a precedent for how airdrop prizes and other crypto-related giveaways are taxed in the future, shaping the regulatory landscape for the industry. As the crypto industry continues to evolve, clarity and transparency in tax regulations will be crucial for fostering trust and compliance among users and exchanges.
