As the implementation of cryptocurrency taxation approaches in just over two months, political demands for a delay are mounting, prompting the government to gather input from the industry. While major countries are refining their cryptocurrency tax systems, South Korea faces ongoing equity concerns after the repeal of the financial investment income tax left only cryptocurrency taxation in place.
On October 20, the Ministry of Economy and Finance held a field meeting at the Seoul Regional Procurement Office, led by Vice Minister Kwon Dae-young, with industry representatives and experts. Participants urged for clearer tax standards based on transaction types and requested a preparation period for establishing a tax data submission system. They also highlighted the need to consider equity for users of overseas exchanges and improve loss carryforward deductions and reporting convenience.
According to current income tax law, starting January 1, 2027, a 22% tax rate, including local income tax, will apply to income from the transfer and lending of cryptocurrencies, after a deduction of 2.5 million won per year. Taxable income must be reported and paid by May of the following year.
Major countries are either incorporating cryptocurrencies into their existing tax frameworks or enhancing their systems. In the United States, the Internal Revenue Service (IRS) has applied existing tax principles to cryptocurrencies since 2014, taxing capital gains from disposals. Recently, reporting obligations for cryptocurrency brokers have also been strengthened.
Japan has taxed cryptocurrency income as miscellaneous income since 2017 and approved a revision in April this year to incorporate it into the Financial Instruments and Exchange Act with a separate tax rate.
In South Korea, the cryptocurrency tax was designed alongside the financial investment income tax in 2020, but the repeal of the latter in 2024 has left only cryptocurrency taxation in effect. The equity of taxation compared to other financial assets, such as stocks, and the consistency of the system remain contentious issues.
In the political arena, several proposals for delaying the tax have emerged. On October 16, Democratic Party lawmaker Park Min-kyu introduced a bill to postpone the implementation date to 2029. Meanwhile, People Power Party lawmaker Jeong Seong-guk proposed a revision to push the start date to 2030, and fellow party member Song Eon-seok submitted a bill to abolish the cryptocurrency income tax altogether.
The cryptocurrency tax has already been postponed three times since its legislation. Initially set for January 1, 2022, when the tax basis was established in December 2020, it was later delayed to 2023 at the end of 2021, then to 2025 at the end of 2022, and finally pushed back to January 1, 2027, alongside the repeal of the financial investment income tax in December 2024.
The government aims to maintain tax principles while comprehensively assessing market conditions and the readiness of the system. Lim Kwang-hyun, the then-Commissioner of the National Tax Service, stated during a National Assembly audit on October 13 that preparations are underway to announce related guidelines around November. Deputy Prime Minister and Minister of Economy and Finance Lee Hyung-il mentioned on October 16 that he would gather more opinions before making a comprehensive judgment, indicating that the current phase is focused on listening.
* This article has been translated by AI.
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