South Korea Lawmaker Proposes 3-Year Delay on Crypto Tax Implementation

3 months ago 29

South Korean lawmaker Rep. Song Eon-seok has introduced a bill to delay the taxation on crypto investment income. The bill seeks to extend the current deadline, previously set for January 1, 2025, by three years.

This bill is expected to be discussed in the National Assembly’s second half session, aligning with the 2025 tax law amendment deliberations.

Infrastructural Challenges Stall South Korea’s Crypto Tax Plans

Rep. Song, who chairs the National Assembly Planning and Finance Committee, argues that the current infrastructure is inadequate for fair and accurate tax collection on crypto transactions. This sentiment echoes previous government actions that have delayed the tax twice, citing similar concerns.

“The current law aims to achieve tax equity between tangible assets like cash and real estate and virtual assets such as cryptocurrencies by categorizing income from the transfer and rental of virtual assets as other income and planning to tax it starting January 1, 2025. However, given the current deteriorating investment sentiment towards virtual assets, which are high-risk assets with a higher potential for loss compared to stocks, there are concerns that imposing an income tax could drive most investors out of the market. Hence, there is an opinion that immediate taxation on virtual assets is not advisable,” the proposal reads.

According to the National Assembly Bill Information System, Rep. Song proposed an amendment to the Income Tax Act on July 12 to defer the tax implementation. The ongoing debate has centered on imposing a 20% miscellaneous income tax on crypto transfers. It also involves taxing annual rental income exceeding 2.5 million won ($1,809).

However, discussions on the practical aspects of calculating crypto transfer income have persisted. Last month, the National Tax Service made headlines for discussing tax calculation methods with domestic crypto exchanges.

Additionally, the National Assembly Research Service noted in the “22nd National Assembly Legislation and Policy Guidebook” that virtual assets should be considered comparable investment targets. This approach is similar to stocks. They suggested that the taxation of these assets should align with the financial investment tax.

Uncertainty Continues as Government Reviews Policy

Multiple postponements have marked the history of South Korea’s crypto tax. Initially scheduled for 2020, the tax implementation was first delayed to 2022 by the Moon Jae-in administration due to insufficient tax infrastructure.

In 2021, another delay pushed the timeline to January 2025, again citing an incomplete tax environment. The current proposal to further defer the tax reflects ongoing concerns about infrastructure adequacy and fairness.

Given the current inadequate taxation environment and the new deferral proposal by a prominent ruling party member, the likelihood of another postponement has increased. The final decision will hinge on the positions of opposition party members who dominate the National Assembly.

Despite remaining noncommittal about crypto taxation, the South Korean government abolished the gold investment tax earlier this year. Democratic Party of Korea leader Lee Jae-myung, representing the largest party in the National Assembly, has voiced support for deferring the gold investment tax. This indicates potential backing for the crypto tax delay as well.

An official stance is anticipated in the upcoming “2024 Tax Revision Bill,” which will be released in late July or early August. Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok stated in a June 17 press conference that the issue remains under review.

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