South Korea Mulls Pushing Crypto Tax Gains Proposal to 2028

Key Takeaways

• The South Korean government is considering delaying the scheduled crypto tax gains.
• The ruling party prioritizes creating a regulatory framework for crypto before implementing taxes.
• Lawmakers have proposed to align crypto tax thresholds with stocks.
• Currently, crypto gains are taxed at a lower threshold, raising questions about fairness and potentially impacting the “Kimchi Premium.”

The South Korean government and ruling party are contemplating postponing the tax on cryptocurrency gains from January 2025 to January 2028 in the upcoming tax revision proposal.

The proposed changes are meant to complement South Korea’s inaugural set of crypto regulations, which are expected to be effective in July. The party’s final election promises will be solidified by the end of the month.

South Korea Hits Pause on Crypto Taxes, But for How Long?

In October 2021, under Moon Jae-in’s presidency, South Korea’s National Assembly passed a law to tax cryptocurrency profits.

However, due to the presidential election the following year, the legislation was postponed to January 2023. President Yoon Suk-yeol’s administration then pushed the date further to January 2025. The delays were primarily due to concerns that taxing cryptocurrency could burden investors and destabilize the market.

The ruling party could announce a final decision later this month in its upcoming tax revision proposal. 

According to local media reports , the party aims first to establish a basic regulatory framework for cryptocurrencies. This framework would include setting standards for crypto custody providers and defining token listing requirements.

Crypto’s Spicy Side Dish: Can “Kimchi Premium” Survive Presidential Election?

It will be interesting to see how the “Kimchi Premium” will respond since, before the parliamentary elections, the interplay between politics and cryptocurrency policy was evident. Political parties were highlighting their digital asset strategies to appeal to a tech-savvy electorate, recognizing the significance of South Korea in the global and Asian cryptocurrency markets.

This is evident from the “Kimchi Premium,” where cryptocurrencies trade at higher prices on South Korean exchanges than on international platforms, signaling strong market interest. This premium not only reflects the vibrant local trading scene but also offers arbitrage opportunities. Therefore, the election outcomes are almost always poised to influence the country’s cryptocurrency regulations significantly.

People Power Party Pledges Crypto Tax Delay Until Regulations Catch Up

According to a People Power Party leadership official, taxation is a duty of the state when protecting the citizens’ property and lives. However, the current foundation for taxing has yet to be established.

“There are no entities overseeing transactions like a securities exchange, and cases have been reported where the burden of income verification is shifted onto virtual asset companies,” he noted and added:

“This will become a pledge for the general election targeting 2030. We believe at least a two-year grace period is necessary until the amendment is passed and such a system is actually established.”

A member of the National Assembly’s Political Affairs Committee from the People Power Party commented :

“There has been some neglect by the government regarding the virtual asset market up to now. We are of the view that virtual assets should be formally introduced as assets, and if we can present this issue before the elections, it could be implemented after the start of the 22nd National Assembly. Therefore, it’s being proposed as an election pledge.”

It is understood, however, that the abolition of the crypto tax will not be considered in the upcoming discussions. The People Power Party argues that it would be unreasonable to break the principle of taxing income.

South Korea Considers Scrapping Crypto Tax Altogether

In June, a representative from South Korea’s Ministry of Economy and Finance suggested that the country’s legislative body should discuss eliminating income tax on cryptocurrency assets. This proposal is part of a broader initiative by the current administration aimed at removing the planned tax on financial investments, including stocks and funds.

Despite this, the People Power Party is not in favor of completely scrapping the planned cryptocurrency taxation.

The party also seeks to align the tax thresholds for crypto assets with those for stocks. Currently, the tax plan would impose a 22% tax on cryptocurrency gains that exceed 2.5 million Korean won (approximately $1,875).

In contrast, stock gains are only taxed if they exceed 50 million won. This discrepancy highlights a significant part of the ongoing discussions around taxation fairness and regulation in the crypto sector.