The South Korean tax authority has issued a stark warning to cryptocurrency holders, indicating that if tax obligations are not met, tax officers may visit their residences to confiscate cold wallets. This announcement from the National Tax Service (NTS) came to light on October 9, as reported by the Hankook Ilbo.
South Korean Tax Agency: We Can Confiscate Your Cold Wallet
With increasing focus on taxing local cryptocurrency holders, South Korean authorities have intensified their crackdown on tax evasion. The NTS’s recent statement indicates an awareness of how some crypto holders prefer offline cold storage solutions to safeguard their assets. The urgency of compliance is evident, as an NTS spokesperson remarked:
“We can now monitor a non-compliant taxpayer’s crypto transaction history using [blockchain protocol] tracking programs. If we suspect they are hiding their coins offline, we can conduct searches at their homes, confiscating [hard drives or PCs].”
However, the agency may face significant challenges in enforcement. According to the Hankook Ilbo, the NTS lacks jurisdiction over foreign platforms where many tax delinquents may be hiding their crypto assets:
“Problems occur in cases where non-compliant taxpayers use overseas crypto exchanges. Since domestic law does not apply overseas, the [NTS] must rely on the cooperation of foreign governments to determine the nature of a delinquent taxpayer’s assets.”
Despite agreements like the Multilateral Tax Administration Cooperation Agreement, which facilitates collaboration with 74 countries, significant gaps remain, especially with nations like the United States, China, and Russia, with whom South Korea lacks formal agreements. Data from the Financial Supervisory Service (FSS) reveals a growing trend among South Korean traders: During the first half of the year, 78.9 trillion won (approximately $55.6 billion) was transferred from domestic exchanges to overseas wallets or platforms.
How Does The NTS Seize Crypto from Domestic Exchange Wallets?
Under the National Tax Collection Act, the NTS possesses the authority to issue “right to question and inspect” orders to individual accounts. This typically occurs in habitual non-payment situations, especially when tax evaders argue they lack the means to fulfill their obligations. Upon verifying the existence of crypto holdings, the respective exchange is instructed to suspend the wallets associated with the delinquent taxpayer.
All assets in the account are subsequently transferred to the NTS’s wallets. In some instances, local tax authorities have even issued ultimatums to crypto holders, warning them that failure to pay tax dues may lead to liquidation of their assets.
If a taxpayer does not respond accordingly, the NTS will swiftly convert the digital assets into fiat currency at prevailing market prices. Data from the NTS indicates that it has seized assets from 14,140 delinquent taxpayers over the last four years, totaling 146.1 billion won (around $103 million) in cryptocurrency.
The message is clear: The NTS is intensifying efforts to ensure compliance among crypto holders, signaling that neglecting tax responsibilities could lead to severe consequences.
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