South Korea Prepares to Postpone Crypto Tax to 2029

Having attempted to implement its 22% crypto gains tax for 6 years, South Korea is preparing to postpone to 2029 the regulation originally scheduled to take effect in 2022, delaying it for the 4th time. The timeline for the tax, which under current legislation is set to apply to crypto asset profits exceeding 2.5 million won (approximately $1,800) annually, has been reopened to debate amid growing political consensus in parliament and discrepancies in the global information-sharing system.

Why is South Korea delaying the crypto gains tax?

In South Korea, under the framework designed as a total of 22%, comprising a 20% central government tax and a 2% local tax, there is no mechanism allowing investors to offset losses from previous years. The bill initially planned for 2022 was first pushed back to 2023, then to 2025, and most recently January 1, 2027 was set on the official calendar. While not even 1 won has been collected during the 6-year legislative process, concerns that the implementation cannot be fairly audited have brought a new postponement proposal to the forefront.

The primary rationale for the postponement debates stems from the Crypto-Asset Reporting Framework (CARF) of the Organisation for Economic Co-operation and Development (OECD). While South Korea aims to begin sharing cross-border transaction data in 2027, the United States' participation in this system being deferred to 2029 creates a 2-year gap. It is noted that this situation would make it difficult to audit investors using foreign exchanges, while domestic exchange users would face unfair scrutiny pressure because they can be tracked more easily.

How will the 2029 timeline work for the crypto tax?

Democratic Party lawmaker Park Min-gyu, in a legislative proposal submitted on October 16, suggested linking the effective date of the tax to the 2nd year following the country's 1st CARF information sharing, namely 2029. Lawmakers from the ruling People Power Party brought postponing the regulation to 2030 or repealing it entirely to the agenda. Backlash from young investors, who view crypto as an alternative investment tool amid high housing prices and economic pressures, has also reached parliament; a petition launched demanding a 2-year postponement exceeded 50,000 signatures and entered the formal review process.

Ministry of Economy and Finance officials discussed the preparation process on October 20 with representatives of the country's 5 largest crypto exchanges and the Digital Asset eXchange Alliance (DAXA). While industry representatives warned that premature taxation would drive liquidity to overseas exchanges, the presidential office also looks favorably on a postponement due to auditing difficulties and fair taxation concerns. In a market where comprehensive digital asset legislation remains incomplete despite the Virtual Asset User Protection Act in force, and trading in XRP, Bitcoin and Ethereum remains heavy on Upbit, parliamentary approval is required to postpone the January 1, 2027 date.

This content is for information purposes only and does not constitute investment advice.