South Korea's court clarifies cryptocurrency gains under the Income Tax Act

A significant court ruling from South Korea now clarifies a previously controversial issue: How are cryptocurrency gains taxed when awarded as prizes during trading events? A South Korean court confirmed the position of the tax authorities, establishing an important guideline regarding the Income Tax Act.

Ranking Competitions and Tax Deduction: The Authorities’ Ruling

The plaintiff in this case argued that the crypto winnings awarded as prizes were part of a ranking competition and should therefore be treated as deductible expenses under South Korea’s Income Tax Act. This claim was based on the interpretation that such prizes should qualify for special tax benefits.

However, the court reached a different conclusion. The judges determined that crypto prizes from trading events do not fall under the definition of deductible ranking competitions as per the applicable Income Tax Act. This precise legal classification means that the tax liability on such crypto gains remains in effect.

Taxation of Crypto Gains: Clarity Through Judicial Decision

The ruling significantly enhances transparency regarding the taxation of cryptocurrencies in South Korea. For individuals and companies active in digital assets, this decision now provides a reliable guideline on which crypto gains are subject to the full tax rate and where the Income Tax Act does not provide exemptions.

Thus, the boundaries between taxable and tax-exempt income in the crypto sector are more clearly defined—an important step toward legal certainty in the South Korean market.