South Korea’s ruling party considers three-year grace period for crypto taxes
A local news publication in South Korea recently reported that the current government is considering delaying the implementation of the cryptocurrency tax for another three years. So, instead of January 2025, the Korean government will stop taxing cryptographic capital gains until January 2028.
Cryptocurrency Tax Relief Will Likely Be Provided to South Korean Investors
Cryptocurrency taxation has been a hot topic of discussion in South Korea, which originally began in 2021 following the passage of the related tax law in the National Assembly during Moon Jae-in’s administration. They later postponed the decision further until 2023, considering the following year’s presidential elections, and until January 2025 under the Yoon Seok-yeol administration.
Some have criticized that taxpayers’ public opinion largely influences crypto tax policy in South Korea. In May 2024, the Financial Services Commission (FSC) presented data showing that the total number of cryptocurrency investors in South Korea shot up by 6.45 million.
With the falling price of Bitcoin and the sharp correction in the broader crypto market, there is growing dissatisfaction with the issues surrounding crypto taxes currently in South Korea. One of the market experts told the publication Hankyung:
“The daily trading volume of cryptocurrencies on domestic exchanges, which was in the 20 trillion won range in March, recently fell to the 2 trillion won range. If cryptocurrency income tax is levied early next year, most investors will leave, further reducing trading.”
Also read: India to present union budget on July 23.
Income tax deferral gains momentum
Interestingly, the scheduled rollback of the income tax on financial investments is also being delayed in South Korea. Despite the government’s announcement to abolish the tax, former leader of the Democratic Party of Korea, Lee Jae-myung, said on the day 10 of this month that “we have to think more about the timing of its implementation”.
Now, if the tax on cryptocurrencies continues while there are delays in the tax on financial investments, investors may feel at a disadvantage. Critics argue that large-scale taxation of cryptocurrencies is impractical due to insufficient institutional and system preparedness. One of the government officials said: “Secondary legislation is needed to classify cryptocurrencies and specify in detail the types of businesses within the industry so that taxes can be collected without difficulty. “Institutional arrangements are still not enough.”
However, some of the opposition leaders responded by saying that the government’s lack of preparation shows that they did not do what was necessary to implement taxes on cryptocurrencies. Furthermore, they added that public opinion is becoming too important in implementing crypto tax rules.