The taxation of cryptocurrency is expected to proceed as scheduled in January 2026. Lee Hyung-il, the Deputy Prime Minister and Minister of Finance nominee, stated that the introduction of capital gains taxes, including the financial investment income tax, should be considered only after market conditions stabilize, but affirmed that cryptocurrency taxation will go ahead as planned. However, concerns have been raised regarding the adequacy of the tax infrastructure needed to calculate acquisition costs, transfer prices, and profits and losses for individual taxpayers.
According to the Ministry of Finance on September 14, Lee expressed during a recent confirmation hearing that specific tax guidelines related to cryptocurrency will be announced within the year through notices from the National Tax Service, ensuring that taxpayers can report without difficulties. He also indicated that it is possible to secure tax data for transactions conducted on overseas exchanges.
The implementation of cryptocurrency taxation has been postponed multiple times. Initially scheduled for 2022, the rollout was delayed due to concerns over tax infrastructure and investor backlash. If implemented in January, taxes will be levied on income generated from the transfer or lending of cryptocurrency that exceeds a certain threshold.
A key issue is that cryptocurrency will be taxed before the financial investment income tax is reinstated. Critics argue that since both stocks and cryptocurrencies are assets from which investors derive profits based on price fluctuations, there needs to be a clear explanation for the differing tax standards applied to each asset class.
Lee stated that the introduction of capital gains taxes, such as the financial investment income tax, will be reviewed only after market conditions are sufficiently stable. In contrast, he reiterated that cryptocurrency taxation will proceed as planned, raising questions about how the timing and criteria for taxing these two asset classes will differ.
Particularly, the effectiveness of the taxation will likely become evident during the actual reporting process rather than the implementation of the system itself. Cryptocurrency investors often use multiple exchanges or transfer assets between exchanges, and may also utilize personal wallets or overseas exchanges.
Determining acquisition costs presents another challenge. When buying and selling cryptocurrency in multiple transactions or switching exchanges, investors must connect the acquisition prices and disposal prices for each transaction to accurately calculate their profits and losses. As the number of different cryptocurrencies held and the frequency of transactions increase, the reporting process may become more complex.
The method for calculating profits and losses is also a contentious issue. It is essential to clarify how to handle profits from one cryptocurrency against losses from another, and how to aggregate profits and losses from multiple exchanges, so that taxpayers can accurately predict their tax liabilities.
Ultimately, the specificity of the tax guidelines to be presented within the year will be crucial. It is not enough to simply define the taxable items and tax rates; the government must also provide clear criteria for acquisition cost calculations, asset transfers between exchanges, the use of overseas exchanges, and various scenarios that may arise during the reporting process.
For the government to implement cryptocurrency taxation as planned, it must establish a reporting system that allows taxpayers to calculate their taxes independently, in addition to outlining the principles of taxation. Given that the introduction of the financial investment income tax has been postponed while cryptocurrency taxation is being implemented first, there is a need to address concerns about tax equity between different asset classes.
Bae Jin-soo, a researcher at the Korea Financial Research Institute, stated, "If cryptocurrency taxation increases the incentive for domestic investors to use overseas exchanges and decentralized exchanges, it could make it difficult to capture tax revenue and negatively impact the domestic cryptocurrency industry and investor protection. Therefore, it is essential to design incentives that encourage investors to remain with domestic exchanges. If there are plans to introduce comprehensive taxation on cryptocurrencies similar to overseas examples, it would be advisable to reflect issues such as profit and loss offsetting and carryover deductions."
* This article has been translated by AI.
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