Emily Walker
Cryptocurrency companies in South Korea will have a reprieve from capital gains tax, as the government has decided to push back its enforcement by two years.
The South Korean legislature has agreed to postpone the crypto tax policy initially set to take effect next year, rescheduling it for 2027.
Postponement of Cryptocurrency Taxation
For the second time, South Korean officials have confirmed that the capital gains tax on cryptocurrencies, which was intended to start in January 2025, will not be implemented as planned.
The current political climate has hindered its introduction next year, necessitating the delay until 2027.
Park Chan-dae, the Democratic Party of Korea’s floor leader, announced on Sunday that a deal has been reached to defer the taxation on cryptocurrency trading profits.
“We have agreed on a two-year moratorium on the cryptocurrency tax implementation proposed by the government and the ruling party,” stated Park regarding the tax set for January 2025.
This two-year suspension comes despite suggestions that the KDP and the ruling People’s Power Party had reached a political compromise favoring a more relaxed stance on taxing crypto gains.
Earlier proposals from the People’s Power Party included delaying the tax until January 2028.
Increasing Tax Deductions
Initially, the Democratic Party opposed the moratorium on taxes and advocated for raising the tax deductibles instead.
They proposed increasing the tax-deductible allowance from 2.5 million won to 50 million won in an effort to pass the legislation without delay.
However, the Democratic Party ultimately aligned with other lawmakers to adjust the implementation timeline.
Park also made it clear that their party would oppose governmental plans on inheritance and gift tax bills that would primarily benefit the wealthy.
The South Korean government is looking to reform the inheritance tax to lower the rate from 50% to 40% while raising deduction thresholds for children inheriting from parents.
Evaluating the Tax Law Impact
Park emphasized that this two-year delay will provide the South Korean government lawmakers with sufficient time to assess the implications of enforcing taxes on profits from digital assets.
Furthermore, cryptocurrency traders now have an additional two years to prepare for potential taxation on their earnings from virtual currency trades.
Once the tax is enforced, cryptocurrency investors in South Korea will incur a 20% capital gains tax from digital asset trading.
The government had originally planned to implement a crypto tax in 2021, but postponed it to 2023 due to concerns over its impact on the local cryptocurrency market.
The anticipated 2023 implementation faced delays again, previously slated for January next year, but has now been rescheduled for 2027.
Featured image from DALL-E, chart from TradingView