A South Korean court has ruled that virtual assets paid to employees under an early resignation arrangement were taxable income, rejecting arguments that the transfers should be treated as damages or a dispute settlement. The case centered on former staff at Ground1, a blockchain affiliate of Kakao, who received company-issued crypto after workplace disputes in 2020.
Dispute Over Resignations
The plaintiffs, including a worker identified as A, had been employed by Ground1 before leaving through what the report described as recommended resignations in September 2020. Their departures followed conflict over job reassignments and corporate restructuring.
According to the case summary, the employees received company-issued virtual assets during that resignation process. They later challenged the resulting tax treatment, saying the assets were not ordinary income but compensation linked to a dispute with the employer.
Why the Court Taxed the Crypto
The court found that the resignation agreement tied the virtual-asset payments to specific conditions. In particular, the agreement called for the employees to refrain from conduct that could harm the company’s reputation and to bring the dispute to an end without making it public.
On that basis, the court held that the transfers qualified as gratuities or “other income” under South Korea’s Income Tax Act, rather than damages. The ruling means the crypto was taxable even though the plaintiffs argued it had been paid as part of a settlement stemming from the employment conflict.
Tax Refund Claim Rejected
After receiving the assets, A and the other plaintiffs reported the payments and paid tax on them. They later sought a reassessment and a refund of roughly $8 million, arguing that the original tax assessments should be revised.
Tax authorities rejected that request, and the plaintiffs then filed suit to overturn the comprehensive income tax assessments imposed on the company-issued virtual assets. The court dismissed that effort, leaving the tax treatment in place.
Company and Legal Context
The decision focuses on how non-cash compensation is classified when it is linked to resignation terms and confidentiality-related obligations. In this case, the court treated the substance of the agreement as more important than the employees’ claim that the payment was restorative in nature.
The report identifies Ground1 as Kakao’s blockchain affiliate and places the dispute in the context of internal tensions over restructuring and personnel changes in 2020. The plaintiffs’ position was that the crypto functioned as settlement money or damages, but the court concluded that the conditions attached to the payment made it taxable income instead.
The ruling adds to the legal treatment of virtual assets in employment-related disputes by indicating that crypto paid under a resignation deal can be taxed when it is provided in exchange for ending a conflict and avoiding reputational harm to the employer.
Source: en.bloomingbit.io