'Coins on overseas exchanges worth KRW 500 million or more' will be automatically detected… failure to explain may result in a huge tax bill

Overseas exchange-held assets also within tax authorities' sight

Assets exceeding KRW 500 million automatically detected… prepare to explain funds flow

Investors holding KRW 500 million or more on overseas virtual asset exchanges should reassess their tax risk starting the new year.

This is because assets and transaction records held on overseas exchanges, which tax authorities previously had difficulty verifying directly, will be progressively shared among countries starting this year.

As global tax information standards are applied to the domestic virtual asset market, analysts say the key variable is shifting from how much tax is paid to how extensively tax authorities can inspect one's overseas assets and transactions.

From this year, transaction information collection… information on holders of assets over KRW 500 million will be revealed

According to public materials from the Organisation for Economic Co-operation and Development (OECD) and tax authorities on the 2nd (local time), major countries including Korea will begin full-scale collection of virtual asset information this year to implement the Crypto-Asset Reporting Framework (CARF).

If CARF is introduced, the holdings and transaction records of residents using overseas exchanges are increasingly likely, in the long term, to come under the visibility of the Korean National Tax Service. In particular, if a person held assets of KRW 500 million or more on an overseas exchange even for a single day but failed to report them, they could face heavy administrative fines.

Jae-hyuk Lee, partner at PwC Samil Accounting Corporation, explained, "After CARF implementation, holdings on overseas exchanges will be automatically transmitted to the Korean National Tax Service, so the likelihood of undisclosed reports being detected is effectively very high. Unlike simple taxes, administrative fines increase in rate according to the amount, so the tax burden that high-asset holders must bear can become very large."

Until now, data from overseas exchanges remained an area difficult for tax authorities to directly obtain, but if an automatic cross-border transmission structure is established through CARF, the perception of these as 'invisible assets' is likely to disappear.

CARF implementation will proceed in phases. From January 1 of this year, virtual asset service providers in each country began collecting user information and transaction data, and from January 1 next year, automatic cross-border information exchange will ramp up. In other words, 2026 is the preparatory stage in which information accumulates, and 2027 is the point when that information moves across borders.

Although information exchange itself begins in 2027, the practical monitoring targets are likely to be the 2026 transaction and holding records, because the information exchanged by tax authorities is organized based on year-end holdings.

Accountant Jae-hyuk Lee said, "Under the CARF system, year-end holdings become the core judgment criterion. Once data sharing begins after 2026, past transactions and holdings may also become an issue retroactively."

The key is 'proving income'… prepare documentation for asset origin and transfer routes

After CARF adoption, the most important part is 'can one explain the origin of the assets/income.' One must be able to clearly explain the process of asset formation and transfer routes.

Investors should first organize transaction records and asset transfer paths into a single sequence. Aligning, in chronological order, transfers between exchanges, personal wallet inflows and outflows, and the sources of funds for KRW deposit accounts will make it easier to respond to future requests for explanation.

Jae-hyuk Lee said, "The biggest change after CARF implementation is not taxation itself but the way tax authorities access information," adding, "Since holdings on overseas exchanges and past transaction records can be automatically linked, organizing documents so that you can explain the source and transfer paths of funds at any time will become virtually mandatory." He emphasized, "The larger the holdings and the greater the use of overseas exchanges, the more pre-arrangement is not optional but an essential risk management preparation."

Yeongmin Lee, Bloomingbit reporter 20min@bloomingbit.io, Suhyun Lee, Bloomingbit reporter shlee@bloomingbit.io