A court has ruled that those who received virtual assets (coins) when leaving a company must pay income tax. The retirees argued the virtual assets were not a taxable "gratuity" but a settlement payment given on the condition of avoiding disputes, but the court rejected that claim.
The Seoul Administrative Court's Division 2 (Presiding Judge Gong Hyun-jin, Director General) said on the 27th that it ruled against five plaintiffs, including a person surnamed Choi, in a suit seeking to overturn the denial of an amended assessment of global income tax filed against the heads of the Dongjak, Gangdong and Banpo district tax offices, in a decision on May 21.
Plaintiff Choi and others worked at a company that develops a Blockchain platform. The company issued its own virtual asset.
In Nov. 2019, they delivered "leadership proposals for the company's development" to the company's chief executive. The management then imposed measures on Choi and others, including demotion through reassignment, a 0% annual salary increase rate, and exclusion from long-term incentives.
Choi and others protested, saying "unauthorized restructuring and reassignment are 'gapjil' that abuses the status of a large corporation," but management responded that it was "a legitimate exercise of personnel authority due to organizational redeployment caused by a downturn in the Blockchain industry."
Afterward, management notified some plaintiffs of dismissal, saying they damaged fairness in a contest and failed to report it. They then informed the parent company's top management that they were preparing legal action. In the end, management and Choi and others agreed to end the employment relationship through recommended resignation and to conclude the dispute.
When leaving the company, Choi and others received retirement consolation money, severance pay, remaining leave compensation, and the virtual asset issued by the company. They treated the virtual asset as a gratuity and filed and paid global income tax from 2021 to 2023.
In June 2024, they filed an amended return with the tax office, claiming the virtual asset was "dispute settlement money" or "damages for non-pecuniary loss" given on the condition that they would not escalate the dispute over unfair personnel measures by management. They argued that because the virtual asset was not a gratuity, the 11.1 billion won in global income tax already paid should be refunded. When the tax office denied the request, they filed suit.
The panel first said of the virtual assets received by Choi and others that "it is reasonable to view them as a gratuity provided in return for early dispute resolution and strict confidentiality." It also dismissed the plaintiffs' claims, noting that "according to the supplemental agreement (prepared by the plaintiffs and management), the parties agreed to withhold taxes from the virtual assets before payment."