South Korea Postpones 20% Tax on Crypto Gains to 2025
South Korean government postpones controversial 20% crypto tax for second time. Tax to be imposed from 2025
By Shashank Bhardwaj
The South Korean government has delayed plans to impose a 20% tax on all crypto income until 2025. On Thursday, government officials announced their new tax reform plans, postponing crypto tax policy to 2025, citing sluggish market conditions and the time needed to prepare investor protection measures.
The announcement comes after lawmakers across the country delayed initial plans to tax virtual assets until 2023 in December. The original plan to levy an additional 20% tax on crypto earnings exceeding KRW 2.5 million ($1,900) in one year remains unchanged. Some reasons for the delay have been attributed to the current global market outlook, which is generally negative. Lawmakers have also expressed concern about the time needed to prepare investor protection measures.
Yoon Suk-yeol, President-elect of South Korea, said it would be inconsistent to impose taxes without a clear basis for legally defining crypto assets in the country’s system. As a result, it would be best to defer the tax until the crypto market matures and new legislation is carefully prepared to provide transparency and investor protection.
The controversial 20% crypto tax was supposed to go into effect in January 2022, but the country’s lawmakers delayed it until 2023. It has now been delayed for two years. According to South Korean blockchain lawyer Harold Kim, one of the reasons for the 20% tax delay could be that small crypto investors would be unfairly targeted, given that the capital gains threshold in the traditional stock market is much higher.
During the election campaign, Suk-yeol promised to abolish capital gains tax to help retail investors and to defer the taxation of crypto assets for two years. According to President Yoon’s plans for South Korea’s crypto and Web 3.0 ecosystem, the Digital Assets Basic Law (DABA) will be presented to lawmakers sometime in 2023. His stance came as the Politicians from both parties were looking to appeal to millennial and Gen Z voters ahead of the presidential election.
Other countries that have implemented such crypto taxes have encountered serious problems. Thailand has proposed a 15% tax on crypto earnings. However, Thai retail traders were outraged over the new tax policy. The government was eventually forced to abandon fiscal policy. From April 1, India imposed a 30% tax on crypto. Heavy taxation has wreaked havoc on the country’s crypto exchanges, with trading volumes plummeting by more than 90% within weeks of new tax laws being implemented.
Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash