Tax Deferral on Coins Excluded from July Tax Law Amendment... Taxation to Proceed as Scheduled Next Year

The tax authorities have decided to implement taxation on virtual assets as scheduled from January next year and are reviewing related measures. The government plans to formalize the enforcement of virtual asset taxation through the tax law amendment bill at the end of July 2026.

According to relevant ministries on May 11, the Ministry of Economy and Finance has decided not to include any deferral of virtual asset taxation in the tax law amendment bill to be announced in July. A government official stated, "In order to implement virtual asset taxation as scheduled from January 1 next year, we plan to establish and release specific taxation standards through a National Tax Service notification." To prepare this notification, the government has been conducting detailed coordination with the five major virtual asset exchange operators—Dunamu, Bithumb, Coinone, Korbit, and GOPAX—as well as the relevant authorities.

The infrastructure for taxation between exchanges and the authorities has already been established. Moon Kyungho, Director of the Income Tax Division at the Ministry of Economy and Finance, explained, "A system is now in place to classify income generated from the transfer or lending of virtual assets as other income and tax it from January next year." With the implementation of the OECD's Crypto-Asset Reporting Framework (CARF) agreement, the National Tax Service will be able to access overseas virtual asset trading databases from 48 countries, including Japan, Germany, and France, starting next year. As a result, a significant part of the 'tax gray area' is expected to be resolved.

Virtual asset taxation refers to levying taxes on investment income from virtual assets such as coins. Under the current Income Tax Act, starting January 1 next year, if the annual income from virtual asset transactions exceeds 2.5 million won, the excess amount will be taxed at a rate of 20% (or 22% including local income tax). For example, if someone makes a profit of 5 million won from trading Bitcoin over one year, a tax rate of 22% will be applied to the 2.5 million won remaining after the 2.5 million won basic deduction, resulting in a tax of 550,000 won. Although taxation on virtual assets was confirmed when the amendment to the Income Tax Act passed in December 2022, its implementation was postponed three times—to 2023, 2025, and 2027—due to incomplete tax infrastructure and related systems.

The tax authorities have stated that in accordance with the basic principle of "where there is income, there is tax," they will not postpone the taxation of virtual assets any further. Among OECD countries, South Korea is almost the only country that does not tax virtual assets. The recent decline in virtual asset prices, which has resulted in less public opposition, is also increasing momentum for taxation. As of the end of February, the total market capitalization of the domestic virtual asset market was about 60 trillion won, remaining on a downward trend after peaking at 110 trillion won in the first half of 2024 and dropping to 95 trillion won in the first half of last year.

However, some in the political sphere argue that because virtual assets are similar in nature to stock trading, the implementation of virtual asset taxation should be deferred as well, in consideration of consistency with the postponement of the Financial Investment Income Tax. The People Power Party has proposed a revision to the Income Tax Act calling for the total abolition of virtual asset taxation for the sake of fairness with the abolition of the Financial Investment Income Tax. Other limitations are also being pointed out, including the non-applicability of carry-forward loss deductions and a two-year gap in tax information from the United States, which will join CARF in 2029. Major countries such as the United States and the United Kingdom allow carry-forward loss deductions and apply differential tax rates based on long-term holdings, taxing virtual assets under the capital gains tax system. In response to these points, the tax authorities stated, "The government maintains its position to implement taxation as planned from next year according to the current regulations."

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