The government is considering an additional delay in the taxation of virtual assets, prompting the industry to hope for a recovery in investor sentiment. However, for this delay to effectively strengthen the market, the government must improve its tax infrastructure and exchanges must prepare to assist with tax reporting. Merely postponing the implementation date could lead to repeated confusion regarding income identification from overseas transactions and verification of acquisition costs.
According to financial sources on October 26, the Blue House is reviewing options to postpone the virtual asset tax, originally set to take effect in January 2027. The Blue House stated the day before that it is “under review and no decision has been made.” For the delay to be confirmed, discussions between the government and ruling party, as well as amendments to the income tax law by the National Assembly, are necessary.
The industry believes that alleviating concerns over tax burdens could help improve the currently subdued investor sentiment. The average daily trading volume for domestic exchanges in the first half of this year was 3.1 trillion won, a decrease from 5.4 trillion won in the second half of last year. While a tax delay could reduce the burden on hesitant investors, actual recovery in trading will also depend on price trends and market conditions.
The industry's call for a delay is not solely based on investor sentiment. A position paper prepared by the Digital Asset Exchange Alliance (DAXA) last month emphasized the need for a robust tax infrastructure, verification of international information exchange systems, and coherence in legislation and taxation related to digital assets.
A key task for the government is to establish a foundation for identifying income from overseas transactions. South Korea plans to begin information exchange under the OECD's Crypto Asset Automatic Information Exchange Framework (CARF) in 2027, but the timing of participation may vary by country. Even when the system is operational, it does not guarantee that data from major overseas exchanges will be available simultaneously.
Income generated from overseas exchanges is also subject to taxation, but discrepancies in data acquisition could limit the ability to verify reported information. Claims of capital flight by the industry are linked not to the tax-exempt status of overseas transactions, but to potential differences in tax enforcement between domestic and international jurisdictions.
Tax standards and reporting methods also need to be clarified. The National Assembly Budget Office highlighted limitations in capturing tax sources, the infrastructure for reporting and payment, and the need for clear tax standards for various transaction types in a report last month. The nature of income from transactions such as staking and lending, as well as the timing of taxation, must be clearly defined to enable investors to calculate their profits and losses.
Exchanges face the challenge of going beyond merely providing transaction records. Upbit currently supports the issuance of transaction statements and balance certificates through its app and website. However, calculating annual taxable income for assets that have passed through multiple exchanges and personal wallets is a separate issue.
For example, if a coin purchased from an overseas exchange is sold on a domestic exchange, knowing only the domestic selling price does not reveal the actual profit. There must be a way to connect proof of acquisition costs and transfer histories. The National Tax Service provides guidance on special provisions for acquisition costs before taxation, but there remains work to assist investors in securing the necessary documentation.
* This article has been translated by AI.
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