As the NFT market is garnering a great deal of interest and enthusiasm worldwide, NFT transactions are being actively made via trading platforms in Korea. However, despite the public’s strong interest in NFTs, no specific legislative guidance is currently available in Korea regarding whether NFTs are taxable, and if so, how they should be treated for tax purposes.
In order to delve into and discuss NFT-related tax issues, the first step would be to understand the legal nature of NFTs. However, as discussed in the previous newsletters, it is difficult to provide a uniform definition on the legal nature of NFT. Depending on the details of the transaction, an NFT transaction may be viewed as a transfer of (i) a virtual asset under the Act on Reporting and Using Specified Financial Transaction Information, (ii) an investment contract security, which is one of the securities defined under the Financial Investment Services and Capital Markets Act, or (iii) a right to the underlying asset (e.g., copyright or neighboring rights to a copyrighted work).
In this newsletter, which is the last of our four NFT newsletter series, we review tax implications of NFT transactions under existing tax law principles assuming the NFT is treated as (i) a virtual asset, (ii) an investment contract security, or (iii) a right to the underlying asset. Please refer to the attachment for further details.
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