Key Takeaways
- • South Korea's National Assembly Strategy and Finance Committee warned that reversing course on the virtual-asset tax, scheduled to take effect in January 2027, could undermine the credibility of tax policy, according to a review report released October 21.
- • The committee said it is difficult to justify abolishing the tax solely on grounds of tax fairness and weaker investor sentiment, even while acknowledging concerns about the 2.5 million won annual basic deduction and the lack of loss carryforwards.
- • The petition to scrap the tax was referred to parliament in May after collecting 50,910 signatures; the virtual-asset tax has already been postponed three times.
- • Domestic virtual-asset market capitalization totaled 87.2 trillion won in the second half of last year, down 21.1% year over year, per Korea Financial Intelligence Unit data cited in the report.
- • The Ministry of Economy and Finance plans an integrated transaction analysis system by year-end and overseas transaction data via CARF from 2027, which it says allows taxation to proceed as scheduled.
Summary
South Korea's National Assembly Strategy and Finance Committee has reviewed a public petition calling for the abolition of the virtual-asset tax, warning that reversing course again could undermine the credibility of the country's tax policy. According to a review report released on October 21, the committee examined the issue through the lenses of tax fairness, investor protection and market impact. The petition, referred to parliament in May after receiving 50,910 signatures, argued that it is unreasonable to tax only virtual-asset income now that the financial investment income tax has been scrapped.
The report noted that the virtual-asset tax has already been postponed three times, and that the regime originally set for introduction in 2022 would lose consistency with earlier legislative decisions if scrapped. It also cautioned that reversing a policy finalized through discussions including the National Assembly's tax subcommittee could erode confidence and create instability in the crypto market. Still, the committee acknowledged merit in investors' fairness concerns, noting that domestically listed share gains are typically exempt while virtual-asset income is taxed after a 2.5 million won annual basic deduction. It said the virtual-asset tax should not be assessed as directly linked to the abolished financial investment income tax, and that whether crypto should receive the same policy support as equities requires separate discussion.
On loss treatment, the report highlighted that virtual-asset losses can only be netted against gains within the same year, whereas the abolished financial investment income tax allowed carryforwards of up to five years to foster risk capital. The system was not adopted for virtual assets over concerns about encouraging speculative trading. The committee also reviewed potential effects on market activity and younger investors' ability to build assets, citing Korea Financial Intelligence Unit data showing market capitalization of 87.2 trillion won in the second half of last year, down 21.1% from a year earlier. The report acknowledged the tax could weigh on sentiment but said further judgment is needed before concluding that it justifies abolition.
On enforcement, the government told parliament it is strengthening information-gathering systems. The Ministry of Economy and Finance plans to launch an integrated analysis system for virtual-asset transaction data by the end of this year and to secure overseas data through the Crypto-Asset Reporting Framework from 2027, which it says allows taxation of domestic and overseas transactions to proceed as scheduled. Separate bills are pending, including one from lawmaker Song Eon-seok to abolish the tax and others from Jeong Seong-guk, Kim Sang-hoon and Park Min-gyu to delay implementation. The committee is set to address the issue during a comprehensive parliamentary audit of the Ministry of Economy and Finance and the National Tax Service on October 22.
The report noted that the virtual-asset tax has already been postponed three times, and that the regime originally set for introduction in 2022 would lose consistency with earlier legislative decisions if scrapped. It also cautioned that reversing a policy finalized through discussions including the National Assembly's tax subcommittee could erode confidence and create instability in the crypto market. Still, the committee acknowledged merit in investors' fairness concerns, noting that domestically listed share gains are typically exempt while virtual-asset income is taxed after a 2.5 million won annual basic deduction. It said the virtual-asset tax should not be assessed as directly linked to the abolished financial investment income tax, and that whether crypto should receive the same policy support as equities requires separate discussion.
On loss treatment, the report highlighted that virtual-asset losses can only be netted against gains within the same year, whereas the abolished financial investment income tax allowed carryforwards of up to five years to foster risk capital. The system was not adopted for virtual assets over concerns about encouraging speculative trading. The committee also reviewed potential effects on market activity and younger investors' ability to build assets, citing Korea Financial Intelligence Unit data showing market capitalization of 87.2 trillion won in the second half of last year, down 21.1% from a year earlier. The report acknowledged the tax could weigh on sentiment but said further judgment is needed before concluding that it justifies abolition.
On enforcement, the government told parliament it is strengthening information-gathering systems. The Ministry of Economy and Finance plans to launch an integrated analysis system for virtual-asset transaction data by the end of this year and to secure overseas data through the Crypto-Asset Reporting Framework from 2027, which it says allows taxation of domestic and overseas transactions to proceed as scheduled. Separate bills are pending, including one from lawmaker Song Eon-seok to abolish the tax and others from Jeong Seong-guk, Kim Sang-hoon and Park Min-gyu to delay implementation. The committee is set to address the issue during a comprehensive parliamentary audit of the Ministry of Economy and Finance and the National Tax Service on October 22.
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