"Stocks Are Not Taxed, but Annual Crypto Gains Over 2.5 Million Won to Be Taxed Next Year... Investors Push Back"

[Bitcoin Now]

Virtual Asset Taxation Set to Begin January 1 Next Year

22% Tax on Annual Income Exceeding 2.5 Million Won

40,000 Sign National Petition to Abolish Tax Within Six Days

Need for Supplementation Considering Overseas

Controversy surrounding the taxation of virtual assets, scheduled to take effect in January next year, has reignited. The government maintains its stance that the law will be enacted as planned under the principle that "where there is income, there is taxation." In contrast, investors are strongly opposing the move, citing reasons such as the incomplete regulatory framework and discrimination compared to other asset classes.

According to the National Assembly e-Petition on May 20, as of 10 a.m. on the previous day, 38,370 people had signed the "Petition to Abolish Virtual Asset Taxation," which was registered on May 13. This figure amounts to 77% of the 50,000 signatures required for referral to the Standing Committee. The petition is open for signatures until June 12.

The petitioner pointed out, "Amid the recent abolition of the Financial Investment Income Tax in Korea, the debate over fairness regarding the taxation of virtual assets is intensifying." They continued, "It is difficult to accept taxing only virtual assets while either withdrawing or easing taxes on traditional financial assets such as stocks, from the perspective of policy consistency and fairness among investors. Imposing a disproportionately heavy tax burden on a specific asset class, even though both are investment-oriented, could violate the principle of tax equity." The petitioner also argued, "Rushing into taxation without a sufficient institutional framework, investor protection mechanisms, international fairness, or a realistic market environment is likely to only increase the burden on citizens and stifle the industry. The current virtual asset tax system requires not mere supplementation or postponement, but a fundamental reconsideration."

Despite the strong opposition from investors, the government does not plan to include a measure to defer virtual asset taxation in the upcoming July tax law revision. The National Tax Service intends to establish detailed taxation standards through official notifications and implement the taxation from January 1 of next year.

Under the current Income Tax Act, starting January 1 of next year, if income from virtual asset transactions exceeds 2.5 million won per year, the excess will be taxed at a rate of 22% (including local income tax). The virtual asset tax system was established through a 2020 amendment of the Income Tax Act, which classified income from the transfer or lending of virtual assets as "other income" subject to separate taxation, and was originally scheduled to be implemented in 2022. However, due to investor backlash and lack of adequate taxation infrastructure, the implementation was postponed three times—to 2023, 2025, and 2027.

Bae Jinsoo, a research fellow at the Korea Institute of Finance, stated, "With no major changes to the overall taxation framework and only the implementation timeline being adjusted, it is necessary to fundamentally discuss the key issues of taxation before the system is enacted and to seek ways to ensure the system’s successful settlement and acceptance."

Major countries overseas provide reasonable buffer measures to prevent market contraction and encourage long-term investment, which contrasts with Korea’s approach. In the United States, a reduced tax rate of 0–20% is applied to virtual assets held for more than one year, depending on income level. In Germany, if virtual assets are held for more than one year after purchase, they are exempt from taxation. Japan, which previously imposed a progressive tax rate of up to 55% that led to capital outflows, is also pursuing tax reforms that include the classification of virtual assets as financial products, the application of a single 20.315% tax rate with separate taxation, and the allowance of loss carryforwards.

Bae pointed out, "Major countries recognize the offsetting of gains and losses and allow for loss carryforwards from a capital gains tax perspective, and apply tax exemptions or preferential tax rates for long-term holdings." He added, "It is necessary to reflect these considerations when designing the tax system."

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