Korea's Tax Agency Demands Disclosure of Crypto Holdings Across Exchange Borders

Korea's National Tax Service has ruled that residents must still declare overseas cryptocurrency accounts even if the exchange collapses. This decision applies to individuals who hold tokens on an overseas platform and are then unable to trade or withdraw due to bankruptcy.

A Korean resident asked the tax agency about reporting their account after the exchange went bankrupt in November 2022, but the agency stated that the duty survives the operator's insolvency. The ruling aligns with Article 53 of Korea's Act on International Tax Adjustment, which requires residents and domestic companies to report overseas financial accounts when the combined balance tops 500 million won (around $350,000) on any month-end during the year.

The disclosure rules are not tied to taxation, as a separate levy on crypto profits is set to take effect in January 2027. However, critics argue that defining new taxable events through administrative notice goes against Korea's 'no taxation without law' principle. The tax agency has yet to clarify how it will handle staking, airdrops, or the calculation of acquisition costs.