South Korea’s Finance Ministry Pushes Crypto Tax to 2023

South Korea’s National Assembly passed a bill pushing the planned tax on crypto capital gains until 2023, according to the country’s finance ministry.

Representatives from both the government and opposition within the Tax Subcommittee in the National Assembly reached the agreement on November 29. The next step is expected to take place at the plenary session scheduled for December 2. If the amendment passes during the session, the intended taxation scheme will be implemented on January 1, 2023, one year later than originally intended. At that point, a 20% capital gains tax will be imposed on any annual gains of more than 2.5 million won.

Political perspectives

While the gains on crypto will still eventually be taxed, delaying the prospect another year was a bipartisan decision. For instance, Democratic Party lawmakers have been pushing for this delay, citing flaws in the prospective information gathering procedures of the National Tax Service (NTS). However, it was the opposition People Power Party that had introduced the bill last month. “It is not right to impose taxes first at a time when the legal definition of virtual currency is ambiguous,” Representative Cho Myoung-hee of the People Power Party said. 

This perspective was also shared by Representative Kim Young-jin, Chairman of the Tax Subcommittee, who pointed out that the government has yet to adopt an official definition of what a cryptocurrency or virtual asset is. “There is an inconsistent system for imposing taxes without a clear basis on how to legally define cryptocurrencies in our system… but only in Korea does taxation come before regulation,” he said.

Both parties also concerned themselves with fairness on behalf of their constituents. One provision of the bill also offers a more generous tax redemption than had been planned, such as imposing a 20% tax rate on profits between 50-300 million won ($42,000-$251,000). “The intention is to ease the tax base to the level of financial investment income tax, so that virtual currency investors do not suffer disadvantages,” one representative said. On the other hand, Finance Minister Hong Nam-ki wants the tax system to be equitable so that those who make gains on cryptocurrency trading contribute their fair share.

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