South Korean Court Upholds Taxation of Crypto Received in Company Exit Settlement

A court in South Korea has upheld the taxation of cryptocurrency received by employees as part of a company exit settlement. The Seoul Administrative Court's ruling came after five individuals, including one person identified as A, filed a lawsuit against tax offices to cancel their comprehensive income tax correction request.

The case began in 2020 when A and others worked at Company B, a blockchain platform developer, but were involved in a dispute with the company over personnel actions. They eventually agreed to a recommended resignation, receiving cryptocurrency as part of the settlement, along with retirement consolation payments, severance pay, and remaining annual leave allowances.

The tax office rejected their correction request for approximately 11.1 billion won in comprehensive income tax, arguing that the cryptocurrency constituted an 'honorarium' under the former Income Tax Act. The court agreed, ruling that the employment relationship between A and Company B was terminated through a recommended resignation, making it reasonable to consider the subsequent legal disputes as concluded according to the parties' intentions.

The court further stated that if the cryptocurrency were considered tax-exempt consolation money for unfair dismissal, there would have been no need for the agreement to include a provision stating it would be paid after deducting taxes. The ruling effectively upholds the taxation of cryptocurrency received in company exit settlements as lawful.