In a notable policy adjustment, the South Korean government has backed a proposal to postpone the implementation of taxes on cryptocurrency gains by two years, shifting the effective date from January 2027 to potentially January 2029. This move, if enacted, marks the fourth deferral of this regulation.
Tax Rate and New Schedule
On Thursday, Finance Minister Lee Hyoung il announced that the government would engage in discussions with legislators regarding the proposed delay. As it stands, the plan stipulates a 22% tax on annual crypto profits exceeding 2.5 million won, comprising a 20% income tax and a 2% local tax.
Lee Hyoung il stated that the government is in talks with Parliament to delay the implementation initially set for January 2027.
Initially slated to be enforced in January 2022, the tax on crypto profits has already been postponed to 2023, 2025, and now 2027. Should the current proposal be legislated, the tax will not take effect until 2029.
International Data Sharing as a Justification
The rationale for choosing 2029 ties closely with the onset of a data-sharing framework with the United States, known as the Crypto Asset Reporting Framework. Officials argue that introducing the tax before this collaboration commences could disadvantage the domestic market against its international counterparts.
The framework, abbreviated as CARF, is designed to facilitate the exchange of information on cross-border crypto-asset transactions, thus simplifying tax audits through standardized reporting protocols.
Officials also noted the necessity of aligning with planned changes in digital asset laws, a move intended to synchronize the tax system with emerging regulatory structures.
Offsetting Losses Under Consideration
A provision in the government’s draft would allow investors to offset their losses against future gains over a three-year period, aiming for a more adaptive approach to crypto asset taxation.
Authorities plan to present tax system improvements during the regular parliamentary session in 2027, with a comprehensive tax guide scheduled for release in the first half of 2028.
In recent discussions with major cryptocurrency exchanges, industry representatives highlighted the urgency for clarification on tax regulations across different transaction types and the inadequacy of time to prepare the necessary technical infrastructure, prompting calls for postponement.
Reversal from Previous Stance
This proposal marks a departure from earlier positions, as a Finance Ministry official had previously asserted in May that implementation would commence in 2027. The latest announcement strengthens the possibility of another timetable adjustment for the tax.
