South Korea's cryptocurrency gains are expected to be exempt from capital gains tax, authorities say: Amendment estimated to pass through parliament in February.

According to local media outlet ZDNet Korea, the Korean Ministry of Economy and Finance's Tax and Customs Office is reevaluating its tax policies on financial assets, particularly income tax related to cryptocurrency assets. The authorities are planning to submit an amendment to the income tax law to the National Assembly within the next two months, with the aim of abolishing capital gains tax.

South Korea Considering Abolishing Financial Investment Income Tax

The Deputy Director of the Tax and Customs Office at the South Korean Ministry of Economy and Finance, Jeong Jung-hoon, revealed in a policy briefing at a public forum a few days ago that the local parliament is expected to discuss whether to include cryptocurrency gains in the scope of the "capital gains tax" that is already planned to be abolished.

It is understood that during the forum, the government's stance is to plan the abolition of financial investment income tax, including stocks and funds, in order to provide more support to the local population, encourage participation in financial investment, and promote personal asset accumulation and financial planning.

In response to a question from the public about whether virtual assets would still be taxed according to the plan announced in January next year, Jeong Jung-hoon stated:

Firstly, the government's stance is to abolish the capital gains tax, and the situation regarding virtual assets will also be discussed in the parliament.

He also added, "We plan to submit a tax law amendment related to 'abolishing capital gains tax' to the parliament at the end of January or early February, hoping to reach a consensus before the national elections."

It is reported that the national representative elections in South Korea are scheduled to be held on April 10th, which means that the current legislative body has less than 3 months to make a decision on the amendment.

Delays in South Korea's Cryptocurrency Tax Law

As a well-known country for cryptocurrency trading, the South Korean National Tax Service previously reported that the total reported amount of cryptocurrency assets in the country reached 130.8 trillion Korean won, approximately 97.2 billion US dollars, accounting for 70% of the total reported overseas account assets.

In view of this, South Korea proposed tax details for cryptocurrency assets as early as July 2020, in the tax law amendment of that year. For individuals with cryptocurrency gains exceeding 2.5 million Korean won, approximately 1,870 US dollars, a 20% income tax and 2% local tax would be imposed. The tax calculation formula is:

Tax = Selling Price - Buying Price + Additional Costs

The additional costs include transaction fees and exchange tax costs. In addition, intentional tax evasion would result in an additional 20% tax and a 40% fraud penalty.

The law was originally scheduled to be implemented in 2022 but has been repeatedly delayed due to incomplete regulations and supporting measures for tax collection. Currently, the cryptocurrency tax system in the country is set to take effect on January 1, 2025.

However, while the implementation of the cryptocurrency tax law has been delayed, regulatory efforts to combat illegal activities continue to be strengthened in South Korea.

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