We have determined that it is difficult to reverse the withholding tax based on the current market situation, as it is necessary to protect users and the service. We will make every effort to improve quickly and achieve more essential growth, taking into account community feedback and considerations related to compensation and balance.
According to US tax law, even if non-US residents receive prizes from US businesses, it is classified as income (other income) generated within the US, and winners are required to pay 30% of the prize amount as taxes. According to the latest guidance from the US Internal Revenue Service, Airdrop Tokens are interpreted as Ordinary Income subject to taxation (IRS FAQ).
Therefore, it is mandatory to obtain taxes and necessary documents (W-8BEN) from non-US resident winners before prize distribution. Failure to comply may result in penalties (approximately 30 billion KRW annually based on land service standards, subject to increase with service and reward expansion) and a risk of discontinuing the land service.
These risks are difficult to avoid, given the significant scale of land service prizes, and they increase even further if rewards are expanded according to the roadmap. Moreover, several countries, including the US and South Korea, have tax treaties in place, and we judged that such risks could also spread to users.
In particular, various legislations, including tax laws, regarding virtual assets are currently being implemented, and considering recent cases of prosecution and detection, we concluded that omitting withholding tax exceeds the acceptable range of risks for service continuity and user protection.