Third Postponement of Crypto Tax Discussed but No Conclusion Reached
The government and the National Assembly discussed on the 28th whether to further postpone the taxation of virtual assets (assets traded in electronic form, such as Bitcoin), set to take effect next January, but failed to reach a conclusion. The taxation of virtual assets, introduced through a 2020 amendment to the Income Tax Act, was originally scheduled to take effect in 2022 but has been delayed three times, to 2023, 2025, and 2027. A lack of taxation infrastructure was cited as a reason for the postponements.
Under the current Income Tax Act, income from transferring or lending virtual assets is classified as other income and taxed separately. After deducting necessary expenses from annual transfer and lending income, a basic deduction of 2.5 million won applies, with a 20% tax rate on the remainder; including local income tax, the effective rate is 22%. For virtual assets held before taxation begins, the higher of the market value on December 31, 2026 or the actual acquisition cost is recognized as the acquisition price.
Under the current tax framework, carryforward deductions of virtual asset losses from previous years are not allowed. Profits and losses within the same year can be offset, but deducting a loss from a previous year against the following year's gains is not permitted. Rep. Park Soo-young of the People Power Party pointed out, "If you lose 40 million won in one year and earn 50 million won the next, your actual profit is 10 million won, yet you would be taxed as if you had earned the full 50 million won," adding, "That is not right."
According to data obtained by the office of Rep. Park Soo-young of the People Power Party, the government and the five major won-based domestic exchanges held 49 consultations on taxation from 2022 through last month, but no exchange has completed building the required systems. Securing information on overseas exchanges also remains incomplete. National Tax Service Commissioner Im Gwang-hyun said consultations with the exchanges are ongoing.
Ordinary small shareholders of domestically listed stocks are generally exempt from capital gains tax on on-market gains, while virtual asset investors are taxed if their annual income exceeds 2.5 million won. Rep. Park Soo-young held a press conference with young virtual asset investors at the National Assembly communication center on the 21st, arguing that taxing only virtual assets with income tax, now that the financial investment income tax has been scrapped, is unfair.
South Korea is set to begin exchanging information under the Crypto-Asset Reporting Framework (CARF) starting in 2027, but the United States plans to participate in its first exchange only in 2029.
