South Korea considers eliminating crypto tax law

The South Korean National Assembly Legislative Research Service has mentioned a possible crypto tax elimination debate in its policy guidebook

The South Korean National Assembly Legislative Research Service has mentioned a possible crypto tax elimination debate in its policy guidebook. South Korean MPs will vote on proposals that could scrap a proposed tax on certain forms of conventional financial investment.

However, some have argued that such a move would discriminate against investors in other assets like stocks and crypto. MPs must decide whether and when to implement the virtual asset income taxation system in conjunction with their discussions about the conventional financial investment tax. The Legislative Research Service noted that some believe virtual assets are investment-focused assets like stocks.

It elaborated that lawmakers need to consider tax parity and fairness if they decide to abolish the conventional financial investment tax. One could argue that the crypto tax should also be postponed or abolished. Previously, lawmakers voted to delay the implementation of a flat-rate 20% tax on crypto-related income exceeding 2.5 million won (approximately USD 1,810) per year.

MPs under pressure to delay or cancel crypto tax The much-maligned ‘crypto tax’ was first voted into law at the start of the decade. But the tax proved divisive in the assembly from the very outset. It was initially intended to come into force in January 2022.

But lawmakers decided to delay it by a year. Instead of coming into force on January 2023, however, political parties then agreed to postpone the launch until 2025. Early in 2024, the People’s Power Party promised voters it would delay the rollout for two further years if it performed well in the April 2024 legislative elections.

The party was roundly defeated, but politicians have found themselves under fresh pressure to ditch the tax regardless. In January 2024, a senior Ministry of Economy and Finance official said the National Assembly should ‘discuss’ whether it should ditch the tax. The official said lawmakers should consider including crypto on a list of tax-free financial investments.

As it stands, the law would require crypto traders to start logging their profits on 1 January 2025. They would then need to report and pay taxes on these profits by May of the following year. Crypto enthusiasts demand investment parity South Korean domestic investment has been sluggish for decades, with many investors preferring to dabble in overseas investment and crypto.

The administration of former President Moon Jae-in took a harder line on this, insisting that ‘where there is income, there should be taxation.’ But Yoon’s administration has instead sought to loosen the pressure on investors, possibly hoping that this will spark growth. Crypto investors say the tax is unfair, as its thresholds are much lower than those for domestic stock market traders. With just six months to go before the tax launches, experts think lawmakers will decide before the end of the current 2024 National Assembly session.


Jun 11, 2024 09:52
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