Crypto gifts to minors nearly triple ahead of new tax rules

More Korean parents are gifting cryptocurrency to their children ahead of tighter taxation and regulatory oversight. The value of virtual assets gifted to minors nearly tripled in just one year, according to National Tax Service (NTS) data on Tuesday.

“Giving Bitcoin when its price is relatively low could also provide tax savings,” a parent who gifted 20 million won ($14,900) worth of Bitcoin to a preschool-age child this year said. As of Wednesday, the price of Bitcoin has fallen to $78,900 from $111,530 a year earlier.

A total of 423 virtual asset inheritances and gifts worth 45.86 billion won were reported last year, according to NTS data submitted to Democratic Party Rep. Jung Tae-ho.

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Compared to a year earlier, the number of cases increased 240 percent and their combined value rose 340 percent.

Of the total, 4.03 billion won worth of virtual assets were gifted to minors aged 18 or younger last year — 2.7 times the 1.47 billion won recorded in 2024. The number of gift transactions nearly doubled to 103 from 53 over the same period.

The number of cryptocurrency gifts to children aged 11 or younger surged from 28 to 65 in just one year. The value of those gifts tripled to 2.35 billion won from 774 million won.

The rise in cryptocurrency transfers between generations comes as the government prepares to tighten taxation and oversight of virtual assets.

Virtual asset service providers will be added to the institutions covered by comprehensive financial asset reviews starting Jan. 1 next year, under the government’s 2026 tax reform plan announced in August.

The NTS has the authority to check the financial holdings of deceased people and donors when examining inheritance and gift taxes. Until now, those inquiries have covered only institutions such as banks, securities firms and insurers.

Starting next year, the review will extend to virtual asset service providers such as Upbit and Bithumb. Tax authorities will gain easier access to information needed to assess inheritance and gift taxes.

Virtual asset service providers will also face NTS inquiries and investigations into inheritance and gift taxes. Cryptocurrency transfers that are not properly reported will therefore be much easier for tax authorities to detect.

“We plan to strengthen oversight of inheritance and gift taxes involving virtual assets through more systematic reviews,” an NTS official said.

Taxation of gains from virtual asset trading is also set to take effect next year.

The revised Income Tax Act stipulates that annual profits exceeding 2.5 million won from virtual asset investments will be separately taxed as miscellaneous income starting Jan. 1. The effective tax rate — including local taxes — will be 22 percent.

An investor who earns 12.5 million won in cryptocurrency profits, for example, would first deduct the 2.5 million won tax-free allowance. Taxing the remaining 10 million won at 22 percent would result in 2.2 million won in taxes.

Although there has been a recent surge in reported cryptocurrency gifts, they may represent only a fraction of the actual transfers. The actual amount of virtual assets being gifted could be far greater, analysts say, because transfers through private wallets, between exchanges or under other people’s names may not be captured by the tax system.

There are also growing calls to review the current system to prevent virtual assets from creating loopholes for tax evasion.

“The system for obtaining tax information needs further improvement to cover transfers between individuals, overseas transactions and private wallets,” Rep. Jung said. “As intergenerational wealth transfers through virtual assets increase, authorities need to accurately assess the extent of such gifts and strengthen the infrastructure for proper taxation.”

Virtual asset gifts are subject to specific reporting and valuation rules. As with cash and other financial assets, inherited or gifted virtual assets must be reported to tax authorities. For assets traded on NTS-designated exchanges, including Bitcoin, the value is calculated based on the average price for one month before and one month after the gift date — the two-month average price.

For other virtual assets that are rarely traded or are not listed on standard exchanges, the reported value is based on the daily average price on the date of the gift.

The tax-free allowances for gifts between family members are the same as those for cash and other assets under the Inheritance Tax and Gift Tax Act.

Over 10 years, a spouse can receive up to 600 million won tax-free, an adult child up to 50 million won and a minor child up to 20 million won.

No gift tax is due if the assessed value stays below the threshold. But the sharp price swings common in cryptocurrency can cut both ways, which means a transfer intended to save on taxes could ultimately result in a much larger tax bill. 

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

Source: www.koreajoongangdaily.com