South Korea Postpones Cryptocurrency Taxation Until 2027
In a recent development, South Korean cryptocurrency firms have been granted a temporary reprieve from capital gains tax obligations. The government has opted to delay the enforcement of this tax policy by two years, moving the new implementation date to 2027.
The Decision to Postpone Crypto Taxation
For the second time, South Korean authorities have announced a deferment in the introduction of capital gains tax on cryptocurrency, which was originally slated for January 2025. The prevailing political landscape in South Korea has influenced this decision, making it challenging to usher in the tax policy next year. Thus, a new timeline has been set for 2027. Park Chan-dae, the floor leader of the Democratic Party of Korea, confirmed on Sunday that an agreement has been reached to delay the taxation on cryptocurrency trading profits.
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Political Dynamics Behind the Delay
“We have decided to agree to a two-year moratorium on the implementation of the cryptocurrency taxation proposed by the government and ruling party,” Park stated. This decision was made despite prior discussions suggesting that the Democratic Party and the ruling People’s Power Party were leaning towards a more lenient approach in taxing cryptocurrency gains. Earlier proposals from the People’s Power Party suggested pushing the new crypto tax policy to January 2028.
Revisiting Tax Deductibles
Initially, the Democratic Party opposed the tax delay, advocating instead for an increase in tax deductibles. Their proposal recommended raising the tax-deductible limit from 2.5 million won to 50 million won, aiming to enforce the law without postponement. However, recent discussions have led to a consensus among South Korean lawmakers to shift the implementation date. Park emphasized that their party would not support the government’s legislative initiatives concerning inheritance and gift tax bills, which they believe would disproportionately benefit the wealthy elite.
Evaluating the Impact of Tax Legislation
Park emphasized that the two-year delay would provide ample time for South Korean legislators to assess the implications of taxing profits derived from digital assets. This postponement offers crypto traders an extended period to align their strategies before they are required to pay taxes on their virtual currency earnings.
Once the tax policy is enacted, South Korean investors will face a 20% capital gains tax on their cryptocurrency trading profits. The South Korean government initially aimed to introduce a crypto tax in 2021, which was subsequently delayed to 2023 due to concerns about its potential negative impact on the local cryptocurrency market. The intended 2023 implementation was further deferred to January of the following year, and now it has been postponed once more to 2027.
