In a tax reform introduced on Thursday, the South Korean government proposed to postpone the planned 20% tax on crypto earnings for two years. If accepted, crypto earnings in South Korea will be taxed from 2025.
The tax plans for the digital asset sector were originally to kick in from January 2022. But in December 2021, the previous government deferred it for a year after massive backlash from investors. The digital asset taxation issue also figured in the Presidential poll campaigns early this year, in which the incumbent President emerged as a pro-crypto leader.
The Finance Ministry is planning to submit the bill related to the tax reforms in the National Assembly before September 2, media reports said.
The South Korean government is working on the “Digital Asset Basic Act,” a regulatory framework for the digital ecosystem in the country, and it’s likely to be introduced in 2024. The tax reforms introduced today are part of the new government’s economic policy roadmap. Among other things, it says the upcoming Digital Asset Basic Act should regulate ICOs and the listing of cryptocurrencies.
Before the election, Yoon Suk-yeol had said that crypto earnings should be taxed only after preparing proper market infrastructure for the digital asset sector.
However, despite President Yoon Suk-yeol’s pro-crypto stance, his promise before the election that his government will increase the threshold for capital gains tax on crypto earnings from $2,000 to $40,000 has not been incorporated into the current tax reform.
The minimum taxable earning from crypto activities remains unchanged at KRW 2.5 million (US$1,900) in a financial year.
The deferment of the planned tax for the crypto sector is part of the broader tax reform marked by tax cuts to boost corporate investments.
“The government plans to help companies actively expand investment and create jobs…. If the tax cut boosts economic vitality, this will prop up the economic growth and boost tax revenue in the long term. Then, we could achieve the goal of enhancing fiscal soundness,” Finance Minister Choo Kyung-ho told a press briefing on Monday.