[2021 Tax Reform] Blocking Tax Evasion Using Virtual Assets... Reporting Required Even for 'Ownership' of Overseas Real Estate

ISA 'Domestic Listed Stocks and Publicly Offered Domestic Equity Funds' Investment Income, Tax-Exempt

[Sejong=Asia Economy Reporter Son Seon-hee] As cases of high-value and habitual tax delinquents abusing virtual assets as a means of concealing property are increasing, the government has initiated improvements to related regulations to enable compulsory collection. In addition, reporting will be mandatory for overseas real estate held without being rented out.

On the 25th, the Ministry of Economy and Finance announced through the '2021 Tax Law Amendment' that it will push for amendments to the National Tax Collection Act to allow tax authorities to request the transfer of virtual assets owned by delinquents from both the delinquents themselves and virtual asset exchanges.

In fact, cases have been uncovered recently where virtual assets worth tens of billions of won were held but concealed, and high taxes were not paid. Under the current system, it is possible to seize virtual assets through claims for return or sale. However, in reality, it has been difficult to seize virtual assets stored in personal electronic wallets if the owner conceals them. Even for virtual assets held in exchanges, there have been many cases of resistance to seizure at the field level.

Accordingly, the authorities decided to allow seizure by directly receiving the virtual assets themselves and permit the immediate sale of seized virtual assets at exchanges.

The government also decided to mandate the submission of data on overseas real estate holdings starting January next year. This applies to overseas real estate worth 200 million won or more (based on acquisition or disposal price) held by individuals as well as domestic corporations, including acquisition, investment operation (rental), and disposal details. If data is not submitted, a fine of 10% of the acquisition price, operating income, or disposal price (up to 100 million won) will be imposed.

Currently, submission of overseas real estate acquisition and operation statements is mandatory, but this has been applied only to transactions occurring since 2014. Through this tax law amendment, reporting will also be mandatory for overseas real estate acquired and held before 2014. However, considering taxpayers’ compliance period, the imposition of fines for non-submission will be deferred for one year until after January 2023.

The government explained, "There were limitations in tax base management for overseas real estate acquired and held before 2014," adding, "The purpose is to strengthen offshore tax base management by requiring submission of details on overseas real estate held without investment operation (rental) to tax authorities."

Additionally, the new tax law amendment includes a two-year extension until the end of 2023 of the special tax credit rate (1.3%) and credit limit (annual 10 million won) for credit card sales. A special separate taxation at 9% on interest income has also been newly introduced for holding government bonds for individuals to support long-term savings and increase demand for government bonds. This applies within a purchase limit of 50 million won per person annually and a total limit of 200 million won.

Financial investment income generated from domestic listed stocks and publicly offered domestic stock-type funds within Individual Savings Accounts (ISA) will be tax-exempt. Other interest, dividends, and financial investment income within ISA (excluding tax-exempt portions) will be aggregated and taxed as before: tax-exempt up to 2 million won (4 million won for farmers, fishermen, and low-income subscribers) and 9% separate taxation on the excess. This will apply to accounts closed after January 1, 2023.