The South Korean tax agency has told crypto holders that officers will visit their homes to seize cold wallets if they fail to pay their tax bills.
The South Korean newspaper Hankook Ilbo reported that the comments came from the National Tax Service (NTS) on October 9.
South Korean Tax Agency: We Can Confiscate Your Cold Wallet
Tax bodies around the country have already launched crackdowns on local tax evaders that hold crypto wallets on domestic trading platforms.
In recent weeks, city authorities have expanded these to cover people who fail to pay water bills and traffic fines.
But the NTS’ warning shows that the agency is aware that many crypto holders keep their coins offline, using self-custody solutions. An agency spokesperson said:
“We can now monitor a non-compliant taxpayer’s crypto transaction history using [blockchain protocol] tracking programs. And if we suspect they are hiding their coins offline, we can conduct searches at their homes, confiscating [hard drives or PCs].”
However, one notable blind spot appears to be standing in the NTS’ path. The newspaper wrote:
“Problems occur in cases where non-compliant taxpayers use overseas crypto exchanges. Since domestic law does not apply overseas, the [NTS] must rely on the cooperation of foreign governments to determine the nature of a delinquent taxpayer’s assets.”
And while the Multilateral Tax Administration Cooperation Agreement allows Seoul to work with 74 nations on tax collection matters, this may not be enough.
South Korea has no such agreements with the United States, nor with nations like China or Russia.
And there is evidence to suggest that an increasing number of South Korean crypto traders are shunning domestic platforms in favor of foreign or decentralized alternatives.
Data from the Financial Supervisory Service (FSS), one of the country’s top financial regulators, shows that as of the first half of this year, the amount of crypto transferred from domestic exchanges to overseas firms or individual wallets amounted to 78.9 trillion won ($55.6 billion).
How Does The NTS Seize Crypto from Domestic Exchange Wallets?
Under the terms of the National Tax Collection Act, the tax agency can impose “right to question and inspect” orders on individual accounts.
The NTS usually issues these orders to exchanges in habitual non-payment cases, particularly if suspected tax evaders claim they cannot afford to pay their outstanding bills.
If the NTS’ probes confirm that the individual holds crypto, the exchange responds by suspending their wallets.
All coins in the account are then transferred to the NTS’ own wallets. Some local tax bodies then give crypto holders ultimatums, warning them that the tax agency will liquidate the tokens if the holders do not settle their tax bills.
If they fail to respond, the agency immediately sells the crypto for fiat “at market price.”
According to NTS data submitted to the offices of the Democratic Party lawmaker Kim Young-jin, the tax service “has seized and collected virtual assets from 14,140 delinquent taxpayers over the past four years.”
This has seen the NTS and its regional affiliates liquidate 146.1 billion won ($103 million) worth of crypto in the same period.
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