Key Takeaways
- • The South Korean government and ruling Democratic Party failed to reach a decision on October 28 on whether to impose a 22% tax on virtual asset investment gains above 2.5 million won starting next year as scheduled, according to Chosunbiz.
- • The National Tax Service is building a "virtual asset integrated analysis system" at a cost of 3 billion won, targeted for completion by year-end and intended for use alongside 2027 taxation.
- • Virtual asset taxation has been deferred three times since it was first pursued in 2020, raising questions about whether a future levy can be imposed if the current timetable slips again.
- • Political pressure stems from declining support among voters in their 20s and 30s, who invest heavily in virtual assets, while recent price declines in Bitcoin have led some industry observers to view now as an optimal time to start taxation.
Summary
The government and the ruling party discussed on October 28 whether to proceed with a 22% tax on virtual asset investment revenue exceeding 2.5 million won beginning next year, but reportedly did not reach a conclusion. Chosunbiz reports a clash between the principle that taxes should follow profit and a view that implementation should be deferred given recent erosion of youth support for the ruling party.
The National Tax Service (NTS), which is responsible for tax collection, is developing a virtual asset integrated analysis system with a 3 billion won budget. The system is designed to track changes in virtual asset holdings by taxpayer and assess taxes proportionate to revenue. Development was scheduled for completion by the end of this year, to be used in step with taxation in the following year. The NTS argues the system can detect tax evasion through laundering of funds via virtual assets even if taxation is deferred, although the report notes this work could reportedly be performed without the new system.
Virtual asset taxation has been pursued since 2020 and has been postponed three times, most recently in 2022 according to the report. Previously, former Deputy Prime Minister for the Economy and Minister of Strategy and Finance Koo Yun-cheol told a National Assembly Strategy and Finance Committee briefing in July that taxation would take effect next year as scheduled. Oh Ki-hyeong, a Democratic Party of Korea lawmaker and the party's secretary on the committee, said in a July media interview that the basic position was to implement the tax as scheduled. Concerns in the presidential office and ruling party about public opinion among investors in their 20s and 30s have since raised the possibility of further delay.
Chosunbiz notes that an indefinite postponement could leave the NTS system effectively idle and make future taxation uncertain. Some financial industry participants argue that falling Bitcoin and other virtual asset prices make the present a suitable time to introduce the levy with less public resistance. Kim Hyeon-dong, a professor at Paichai University, said there is no justifiable reason to defer the tax, warning that deferral due to taxpayer resistance would leave no basis for levying taxes in the future, and adding that paying taxes on income is a matter of tax justice.
The National Tax Service (NTS), which is responsible for tax collection, is developing a virtual asset integrated analysis system with a 3 billion won budget. The system is designed to track changes in virtual asset holdings by taxpayer and assess taxes proportionate to revenue. Development was scheduled for completion by the end of this year, to be used in step with taxation in the following year. The NTS argues the system can detect tax evasion through laundering of funds via virtual assets even if taxation is deferred, although the report notes this work could reportedly be performed without the new system.
Virtual asset taxation has been pursued since 2020 and has been postponed three times, most recently in 2022 according to the report. Previously, former Deputy Prime Minister for the Economy and Minister of Strategy and Finance Koo Yun-cheol told a National Assembly Strategy and Finance Committee briefing in July that taxation would take effect next year as scheduled. Oh Ki-hyeong, a Democratic Party of Korea lawmaker and the party's secretary on the committee, said in a July media interview that the basic position was to implement the tax as scheduled. Concerns in the presidential office and ruling party about public opinion among investors in their 20s and 30s have since raised the possibility of further delay.
Chosunbiz notes that an indefinite postponement could leave the NTS system effectively idle and make future taxation uncertain. Some financial industry participants argue that falling Bitcoin and other virtual asset prices make the present a suitable time to introduce the levy with less public resistance. Kim Hyeon-dong, a professor at Paichai University, said there is no justifiable reason to defer the tax, warning that deferral due to taxpayer resistance would leave no basis for levying taxes in the future, and adding that paying taxes on income is a matter of tax justice.
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