The South Korean President's Office is reviewing the plan to postpone for the fourth time the imposition of a 22% tax rate on earnings from crypto assets in the country, with an increasing number of lawmakers and industry groups supporting the move to push back the implementation date to 2029.
This tax was originally scheduled to take effect on January 1, 2027. According to Newsis, the President's Office stated that consultations are underway with various government departments regarding the postponement, citing gaps in the regulatory framework as well as issues arising from the equal treatment of domestic and overseas transactions.
This taxation arrangement can be traced back to the revision of the Income Tax Act in 2020. According to the regulations, for annual income from the transfer or lending of virtual assets, after deducting 2.5 million Korean won (1,888 US dollars), a national tax rate of 20% and a local tax rate of 2% apply. The tax was initially scheduled to be implemented in 2022, but was subsequently postponed to 2023, 2025, and then 2027, due to officials acknowledging that the tax system and investor protection measures were not yet ready.
US data issues
The rationale for supporting a postponement until 2029 is based on the Organization for Economic Co-operation and Development (OECD)’s “Framework for Reporting on Crypto-Assets.” This standard requires tax authorities of various countries to exchange records of crypto transactions with each other. South Korea is among the first jurisdictions to begin exchanging information in 2027, while the United States will not join until 2029.
An official from the presidential office told Newsis that the lack of U.S. transaction data is the biggest bottleneck. Without this data, the Korean National Tax Service will have to trace overseas transactions one by one, and Korean investors trading on domestic exchanges in South Korea will bear a heavier burden compared to those using overseas platforms or self-hosted systems.
On October 16th, Park Min-kyu, a member of the Common Democratic Party, along with 13 other legislators, submitted a bill proposing to postpone the implementation of this tax to January 1st of the following year after the first international data exchange, which would be in 2029 according to this calculation. Song Yan-sik, a member of the National Power Party, separately submitted a bill proposing to remove the provisions related to the crypto tax from the law.
The Korea Digital Asset Industry Association supported the 2029 timeline on Thursday and called on the government to pass a digital asset law before any tax measures take effect, in order to provide investors with the same level of protection as that available in the stock market.
Continuously intensifying tax disputes
Relevant pressures are coming from multiple directions at the same time. Last week, two public petitions – one calling for the abolition of the tax and another requesting a two-year postponement – both surpassed the 50,000-signature threshold, triggering congressional review. Kim Min-sik, the leader of the Democratic Party of Korea, called for a “thorough final review,” which represents a change in stance for the party, which has consistently maintained a position in favor of implementation by 2027.
Finance Minister Lee Jong stated on Thursday during a parliamentary audit that the government would make a decision “after carefully considering and widely listening to the opinions of the industry and all members of parliament.” On the same day, Chairman of the Financial Services Committee, Lee O-won, also expressed that this tax measure should “take into full account various circumstances.”
The Virtual Assets User Protection Act came into effect in July 2024, but the Licensing Framework, the Digital Assets Basic Law, which was mentioned alongside the approval of spot Bitcoin ETF, has not yet been passed. Members of parliament question whether it is appropriate to impose taxes on this market before the relevant legislation has been established.
The South Korean National Tax Service has not slowed down its pace. It plans to release a draft notice regarding taxable cryptocurrency income by the end of October. The government expects to finalize its stance through interdepartmental consultations after the audits are completed, and to make a decision through the parliamentary tax law revision process from the end of November to the beginning of December.
