South Korea’s ruling Democratic Party lawmakers have agreed to recommend another postponement of the country’s cryptocurrency income tax, with a two-year delay until 2029 emerging as the preferred option.
Summary
- South Korea’s ruling Democratic Party lawmakers have recommended postponing cryptocurrency income taxation to 2029.
- Lawmakers cited gaps in overseas transaction reporting, unfinished digital asset legislation and concerns over exchange readiness as reasons for seeking additional preparation time.
- The proposed postponement would be the fourth since South Korea approved its crypto tax framework in 2020, which imposes an effective 22% tax on annual gains exceeding 2.5 million won.
- Democratic Party leadership is expected to review the recommendation within one to two weeks, while any change to the existing implementation date would require parliamentary approval.
According to Seoul Economic Daily, members of the National Assembly’s Finance, Economy and Planning Committee reached the decision on November 3 following a closed-door meeting with government officials, citing concerns over overseas transaction data, pending digital asset legislation and exchange readiness.
Democratic Party lawmaker Oh Ki-hyung, who serves as the ruling party’s secretary on the committee, told reporters that lawmakers continued to support taxing income earned from cryptocurrencies but believed the government needed more time to prepare.
“We agree with the tax principle that income should be taxed where it arises,” Oh said, adding that current policy conditions made further preparation necessary before implementation.
The recommendation will now go to the party leadership and policy committee, with discussions expected to determine whether the tax should be postponed and for how long.
While most committee members favored a delay of approximately two years, the proposal has not received final approval. The existing law still requires crypto income taxation to begin on January 1, 2027.
South Korea crypto tax delay tied to overseas reporting gaps
One of the main concerns raised during the meeting was the government’s ability to obtain reliable transaction information from cryptocurrency exchanges operating outside South Korea.
Lawmakers pointed to the Crypto-Asset Reporting Framework, an international reporting system developed by the Organisation for Economic Co-operation and Development to help tax authorities exchange information about cryptocurrency transactions.
South Korea is scheduled to begin exchanging information under CARF in 2027, while the United States is expected to participate from 2029. The difference in implementation dates has become a major consideration in the debate over when taxation should begin.
Oh said effective taxation would require access to overseas transaction records, particularly as the international reporting system becomes more comprehensive.
The concerns had already prompted Democratic Party lawmaker Park Min-gyu to introduce a proposal linking crypto taxation to the start of international information exchanges.
His October 16 bill would move implementation to January 1 of the second year following the first qualifying exchange of cryptocurrency transaction data under CARF.
Domestic exchanges face a separate problem when investors transfer cryptocurrencies from overseas platforms. In such cases, local operators may have records of the assets received without access to their original purchase prices, making it difficult to calculate taxable gains.
The National Tax Service has maintained that incomplete overseas records do not necessarily prevent taxation. Deputy Commissioner Park Hae-young previously told lawmakers that authorities could use available foreign account information and CARF data to reduce reporting gaps.
Pending digital asset legislation raises further concerns
Lawmakers have raised questions about how South Korea’s planned Digital Asset Basic Act could affect the existing tax framework.
The legislation is expected to address cryptocurrency businesses, transaction structures and other aspects of the country’s digital asset market.
In October, crypto.news reported that the Digital Asset Basic Act had entered the final stages of government consultations, although regulators had not announced a formal introduction date.
Oh said the government needed to consider potential changes to business classifications and transaction rules before finalizing how cryptocurrency income would be taxed.
Exchange reporting systems remain another concern. Officials are reviewing how transaction records would be shared with the National Tax Service and whether existing infrastructure can handle the proposed requirements.
Bithumb previously estimated that developing and testing its reporting infrastructure could take six to nine months after authorities provide a suitable testing environment, according to materials submitted to lawmakers.
The exchange’s assessment covered data accuracy, integration with tax authority systems and operational stability.
Crypto taxation has already been postponed three times
South Korea first approved its cryptocurrency income tax framework in 2020, with implementation originally scheduled for January 2022.
The government subsequently postponed the start date to 2023, then 2025 and finally 2027, following disagreements over investor protections and the readiness of tax collection systems.
Under the existing framework, individuals would pay a 20% tax on annual cryptocurrency income exceeding 2.5 million won, with local income tax bringing the effective rate to 22%.
The rules cover income from selling or lending cryptocurrencies. Investors can offset gains against losses within the same tax year, but losses cannot be carried forward to future years.
If taxation begins as currently scheduled, investors would report their 2027 taxable income in May 2028.
The uncertainty surrounding another postponement has raised questions about how investors should calculate their taxable profits.
A recent analysis of crypto cost basis explained that the current rules use the higher of the original acquisition cost or the prescribed market value at the start of taxation for cryptocurrencies acquired before implementation.
Meanwhile, the National Tax Service has been preparing new tax guidelines for November, covering transactions involving staking rewards, airdrops, hard forks and decentralized finance.
Tax Commissioner Lim Gwang-hyeon told lawmakers during an October 13 parliamentary hearing that the agency was working with exchanges and government officials to clarify how different cryptocurrency transactions should be treated.
Party leadership expected to decide within two weeks
The Democratic Party is expected to settle its position within one to two weeks following discussions with its leadership and policy committee.
The November 3 meeting followed earlier discussions that had exposed differences among lawmakers, with some supporting taxation as scheduled and others favoring more preparation time.
South Korea’s presidential office had previously backed another tax postponement, while opposition People Power Party lawmakers had proposed either delaying implementation further or repealing the cryptocurrency income tax altogether.
The party and government are scheduled to hold further high-level discussions this weekend, with any change to the January 2027 implementation date requiring an amendment to the Income Tax Act.
