Government to Implement Cryptocurrency Taxation as Planned Starting Next Year

The government plans to implement taxation on cryptocurrency income as scheduled starting next year, without any further delays.

Koo Yun-cheol, Deputy Prime Minister and Minister of Economy and Finance, stated during a report to the National Assembly's Finance and Economy Committee on July 29 that, in response to a question from People Power Party lawmaker Kim Sang-hoon regarding the timing of cryptocurrency taxation, "Currently, we are pushing forward with the plan to tax starting next year as scheduled."

Koo explained, "We are currently deferring taxation on cryptocurrencies until the end of this year, but starting next year, taxation will be in effect."

Under the current system, income from cryptocurrencies is classified as other income rather than capital gains. As a result, loss carryforwards, which allow investors to offset losses against profits in subsequent years, are not permitted.

In response to concerns about the lack of loss carryforwards, Koo noted, "In the case of stock investments, carryforwards are also not allowed. Since we are classifying it as other income, there are benefits provided, which is why we do not allow loss carryforwards."

Koo emphasized that, unlike major countries abroad, South Korea applies a taxation system for cryptocurrency income based on other income rather than capital gains tax. He stated, "In the United States, Japan, and the United Kingdom, cryptocurrencies are taxed as capital gains, while in our country, we apply a 20% separate taxation rate for other income and recognize other deductions."

He also mentioned that transitioning the cryptocurrency taxation system to a capital gains tax framework would require a comprehensive review of the capital market taxation system, including financial investment income. Koo said, "To shift to a capital gains tax system, we need to consider how to approach the entire capital market, not just cryptocurrencies. We will implement the taxation next year and make adjustments as necessary based on our observations."

* This article has been translated by AI.