Virtual Asset Taxation Postponed by One Year... Actual Tax Payment by Investors Starting in 2024 (Comprehensive)

'First-Generation Single-Homeowners' Capital Gains Tax Exemption Raised from 900 Million to 1.2 Billion Won... Inheritance Tax Can Be Paid Over 10 Years and Artworks Accepted as Payment

[Sejong=Asia Economy Reporter Son Seonhee] The National Assembly has postponed the taxation of virtual assets, originally scheduled to be implemented next year, by one year to 2023. This outcome reflects the alignment of interests between the ruling and opposition parties aiming to capture the youth vote ahead of next year's presidential election. Virtual asset investors will actually pay taxes starting in 2024 on capital gains generated from 2023.

On the 30th, the National Assembly's Planning and Finance Committee approved an amendment to the Income Tax Act reflecting this change. Initially, from January 1 next year, a 20% tax rate was to be applied on capital gains from virtual asset transfers exceeding the basic deduction of 2.5 million KRW per year, but this has been postponed to January 2023.

During the passage of this amendment, the government repeatedly expressed opposition. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, reiterated on the day, "We have stated multiple times that it is desirable to have a system in place to tax and to start taxation from next year."

However, he added, "Since legislative amendments are the prerogative of the National Assembly, if the ruling and opposition parties decide as such, the government should accept and implement the legislation." While the government had no choice but to respect the National Assembly's legislative authority based on bipartisan agreement, it left a record of opposition until the end.

On the same day, the National Assembly also passed an amendment to the Income Tax Act easing the capital gains tax exemption threshold for first-time homeowners from the existing 900 million KRW to 1.2 billion KRW.

Additionally, the scope of medium-sized enterprises eligible for the business succession deduction was expanded from the current 'less than 300 billion KRW in sales' to 'less than 400 billion KRW.' The deduction limit for farming inheritance was also increased from 1.5 billion KRW to 2 billion KRW.

The installment payment period for inheritance tax was extended from the current maximum of 5 years to 10 years to reduce taxpayers' burdens, and a special provision for payment in kind of inheritance tax on cultural assets and artworks was newly established. However, for artworks, this is limited to cases where the Minister of Culture, Sports and Tourism requests it due to historical, academic, or artistic value.

The National Assembly also passed an amendment to the Value-Added Tax Act to raise the local consumption tax rate by 4.3 percentage points in accordance with the second phase of fiscal decentralization measures, including the transfer of central government functions and net expansion of local finances.

Furthermore, the non-taxable limit on stock option exercise gains for venture companies, currently applied up to 30 million KRW, will be expanded to 50 million KRW. Tax deferral benefits will also apply to stock options issued below market price. However, the gain portion resulting from issuance below market price will be subject to earned income tax.

The government initially proposed extending the tax credit application period for benevolent landlords until June next year, but it was decided to extend it by an additional six months, totaling one year until the end of next year.

This content was produced with the assistance of AI translation services.