- South Korean crypto exchange Bithumb’s airdrop recipients from 2018 to 2021 face unexpected tax bills.
- Bithumb has pledged to cover these tax bills and is challenging the National Tax Service’s (NTS) decision to retrospectively tax its customers.
- The NTS has classified these airdrops as “other income”, resulting in a tax rate of 22% for prizes exceeding around $37.
South Korean Bithumb airdrop recipients face unexpected tax bills, with the exchange stepping in to cover these costs and challenge the National Tax Service’s decision.
Bithumb Airdrop Events Hit Hitch?
Customers of Bithumb have been told to pay a combined total of around $30 million in taxes as a result of winning airdrop prizes and participating in cashback-type promotions. The NTS believes that Bithumb distributed almost $61 million worth of assets to South Korean residents from 2018 to 2021. The tax bills have come as a surprise to many, especially since South Korea does not currently tax crypto-related profits. However, the NTS does require winners of “lotteries and similar events” to declare and pay taxes on their winnings, classifying these as a form of “other income”. Bithumb has reported that 10,700 of its users were told to pay a total of $15 million in taxes last year alone. This is the first instance of the NTS taxing South Korean airdrop recipients.
Free Gifts or Prizes? Exchange to Dispute NTS Decision
Bithumb has stated that it will “immediately” compensate its customers for anything they had to pay the NTS as a result of receiving its airdrops. However, the exchange has announced that it is “filing a tax appeal” against the national tax body. Bithumb argues that “virtual assets and commission cashback distributed via events are a type of free gift or sales benefit”, and therefore, should be “exempt from taxation”. The success of the appeal will depend on “the nature of the event giveaways”, according to South Korean tax experts. While the NTS views the tokens as “a prize”, Bithumb insists these are “free gifts”.
Legal Process ‘Could Take Years to Resolve’
The exchange may argue that it is following the example of securities providers, who often give out stocks to new account holders. In more conventional cases, shopping outlets that give high-spending customers gift certificates also avoid legal issues. In neither case do recipients pay taxes, experts added. This is because the NTS does not see such handouts as competition “prizes”, but as “free gifts”. However, appeals to the NTS are often time-consuming, and it may take up to several years for a ruling to emerge. Bithumb is currently aiming to become the first South Korean crypto exchange to float on the nation’s stock exchange.
Conclusion
The unexpected tax bills faced by Bithumb’s airdrop recipients highlight the complex and evolving nature of cryptocurrency regulation. As Bithumb challenges the NTS’s decision and pledges to cover these costs, the case could set a precedent for how airdrops and similar crypto events are taxed in the future. However, with the potential for the legal process to take years to resolve, the final outcome remains uncertain.
