- Parliament schedules a plenary session to defer digital asset taxation on December 23, KST
- 20% tax on coin income delayed by two years
The South Korean ruling and opposition parties have agreed to delay the implementation of digital asset taxation until 2025. The coin exchange industry and investors, who were worried about the performance of taxes next year, can breathe a sigh of relief.
An official from the National Assembly's Budget Office of Korea said, "As the ruling and opposition parties reached an agreement on the budget bill to delay the implementation of the financial investment income tax and the taxation of digital assets to be delayed for two years."
The taxation rule sparked much controversy in South Korea when the government initially unveiled a 20% crypto earnings tax on those with cryptocurrency gains exceeding KRW 2.5 million ($1,946) that would come into effect in January of 2023 amidst the FTX meltdown. It was initially scheduled to come into effect at the beginning of 2023. However, as the one-year postponement bill passed the National Assembly last year, the implementation date was postponed to January next year.
The recent delay determined that regulations to protect investors should be put first. Furthermore, taxes in cases where the fundamental law (the Industrial Rights Act) addressing fundamental issues such as investor protection was not passed might pose issues concerning tax payment compliance. The Luna collapse enhanced market volatility, resulting in a new crypto regulation legislation approach.
Bang Ki-seon, 1st Vice Minister of Economy and Finance, explained at the tax subcommittee held on the 22nd of last month that "an institutional and legal preparedness is needed in a circumstance where the number of exchanges has reached from 36 entities in October (compared to 6 in November 2021)." However, as some members of the Democratic Justice Party stated, "A delay of another two years does not fit the tax principle."
The coin sector then asked for a deferral, claiming that taxes might depress investor enthusiasm in a context where criteria for listing and investor protection have not yet been defined. Concepts such as purchase price calculation are required for taxation.
"Digital Asset Exchange Joint Consultative Body (DAXA)," a group of cryptocurrency exchanges that includes South Korea's most prominent companies, including Upbit, Bithumb, Coinone, Korbit, and Gopax, stated on December 22, agreeing upon the 'where there is income, there is tax' idea. However, due to a lack of time and tax research infrastructure, a two-further-years delay is needed.