South Korea’s National Tax Service has clarified that residents and domestic companies must still report accounts at overseas virtual-asset exchanges even when those platforms have gone bankrupt and users can no longer trade or withdraw funds.
Under the country’s foreign financial account disclosure rules, the reporting duty applies based on the existence of the overseas account and the balance threshold set by law. The guidance means insolvency or service suspension at a foreign crypto exchange does not by itself remove the filing requirement.
Reporting rule still applies after exchange failure
The tax agency said foreign virtual-asset exchange accounts remain subject to foreign financial account reporting even if the operator has entered bankruptcy and trading or withdrawals have been halted. The position applies to accounts held outside South Korea by both individuals and domestic corporations.
That clarification centers on the Adjustment of International Taxes Act, which governs disclosure of overseas financial accounts. The rule is not limited to active trading accounts and, according to the agency, still covers accounts at failed offshore exchanges.
Threshold and filing timetable
Under the law, South Korean residents and domestic corporations must report foreign financial accounts to the relevant tax office in June of the following year when the combined balance exceeds 500 million won. The reporting framework covers total balances across applicable overseas accounts rather than treating each account in isolation.
Virtual assets were brought into the foreign financial account reporting regime in 2023. They were added alongside more traditional categories such as deposits and stocks, extending the disclosure system to overseas crypto holdings.
Crypto holdings reported this year fell overall
For this year’s foreign financial account filings, virtual assets accounted for 10.5 trillion won, or about $7.59 billion. That total was 5.4% lower than a year earlier, indicating a decline in the overall amount of crypto reported under the system.
The National Tax Service said the broader drop in virtual-asset prices contributed to the decrease in the aggregate reported total. The agency’s explanation ties the lower reported value to market conditions rather than to any change in the reporting standard itself.
Individuals rose while corporate holdings dropped sharply
Within the reported figures, holdings attributed to individuals increased even as the overall total declined. Individual filers reported 9.8 trillion won, roughly $7.09 billion, up 5.4% from the previous year.
Corporate filings moved in the opposite direction. Reported virtual-asset holdings by companies fell 61.1% to 700 billion won, or about $506 million, marking a steep year-on-year drop in the corporate share of declared overseas crypto assets.
What the clarification means next
The latest guidance provides a practical reference for future filing periods: account holders cannot assume that a bankrupt exchange or frozen services eliminate the need to report an overseas crypto account. If the legal threshold is met, the filing obligation still applies under the tax law as described by the agency.
The next confirmed step under the existing framework remains the annual June reporting process for the following year, with overseas virtual-asset accounts continuing to be treated as part of South Korea’s foreign financial account disclosure regime.
Source: en.bloomingbit.io