It has been revealed that individuals and corporations residing in South Korea declared virtual assets held in overseas accounts last year, amounting to a staggering 131 trillion won (US$98.72 billion). This constitutes a whopping 70 percent of the total reported amount for overseas financial accounts.
On Sept. 20, the National Tax Service (NTS) announced this year’s report on overseas financial account declarations, which included the aforementioned information.
This year, a total of 5,419 individuals have reported their overseas financial accounts with a total declared amount of 186.4 trillion won. This marks a significant increase compared to the previous year, with a 38 percent rise in the number of declarations and a 191 percent increase in the reported amount. It represents the highest performance since the implementation of the overseas financial account declaration system in 2011. The NTS explained that this year’s inclusion of virtual asset accounts in the scope of overseas financial account reporting had a significant impact.
Despite being the first report for virtual asset accounts, a total of 1,432 individual and corporate declarants reported an impressive 130.8 trillion won, constituting the highest amount among all declarants. The figure accounts for 70.2 percent of total reported assets.
Among these, corporate declarants, numbering 73, reported a total of 120.4 trillion won. It is analyzed that corporate declarants, primarily coin issuers, reported for the first time this year as they held reserve quantities of their self-issued coins in overseas wallets.
However, 1,359 individual declarants also held a substantial amount, totaling 10.4 trillion won. The average declared amount per person stood at 7.66 billion won. By age group, individuals in their 30s reported the highest amount, totaling 6.76 trillion won, which accounts for 64.9 percent of the total. The average declared amount per person in their 30s reached 12.38 billion won, while those in their 20s and younger declared an average of 9.77 billion won, coming close to the 10 billion won mark.
With the mandatory reporting of overseas virtual assets by tax authorities, both the industry and government anticipate the revelation of the previously hidden scale of substantial coin investments held abroad. There is an atmosphere of expectation that this will shed light on the investment activities of individuals who have engaged in high-risk, high-return trading, such as futures, on overseas exchanges like Binance and Bybit. Overseas virtual assets are relatively harder to track compared to traditional financial instruments such as checking and savings accounts or stocks, making it difficult to monitor transaction histories. With the establishment of overseas virtual asset reporting, there is also speculation about the potential effect of domestic investors who had previously gravitated toward foreign exchanges returning to domestic exchanges.
However, there are concerns that the impact of preventing illegal transactions such as overseas fund concealment and tax evasion may be limited due to the fact that overseas virtual assets valued at less than 500 million won are not subject to reporting. The reporting requirement for overseas financial accounts applies to residents and corporations in South Korea whose overseas financial account balances exceeded 500 million won on any day of each month from January to December of the previous year.
Considering that the general public can easily engage in coin trading through overseas exchanges, there is a prevailing expectation that the unreported overseas virtual assets valued at less than 500 million won could still be significant. The virtual asset industry views the reported amount of overseas virtual assets held by domestic corporations as a result of the virtually closed-off environment for domestic investments, forcing investors to resort to overseas accounts for their investments.
Excluding virtual assets, the reported value of savings and stocks decreased by 8.4 trillion won compared to the previous year, amounting to 55.6 trillion won. This decline is largely attributed to a significant drop in the reported value of stock accounts, which decreased by 11.6 trillion won, or 33.1 percent, compared to last year. The NTS credited this decrease to the declining valuation of held stocks in response to a downturn in the overseas stock market.
Among all overseas financial account declarants, 4,565 individuals reported a total of 24.3 trillion won. The top 10 percent group held 73.7 percent of the total reported amount. The upper echelon reported an average overseas financial account balance of 39.14 billion won per person, a level nearly 75 times higher than the average of 520 million won per person in the bottom 90 to 100 percent group.
Corporate declarants, comprising 854 entities, reported a total of 162.1 trillion won, marking a staggering 289.7 percent increase compared to the previous year’s 120.5 trillion won. The top 10 percent group held 96.3 percent of the total reported amount, with an average of 1.84 trillion won per corporation.
Both individual declarants and corporate declarants reported the highest amounts held in U.S. accounts, followed by Singapore for individuals and Japan for corporations.
Meanwhile, the NTS plans to thoroughly verify individuals suspected of not reporting their overseas financial accounts through data exchange between nations. It intends to impose fines, issue warnings, initiate criminal prosecutions, disclose the list of offenders, and enforce tax collection in accordance with the severity of the violation. Those who fail to report amounts exceeding 5 billion won may face criminal penalties or have their personal information disclosed.