South Korean officials will hold consultations with representatives of the five largest crypto exchanges in the country on the potential postponement of the much-debated cryptocurrency tax. The proposed tax, which is set to come into effect in 2027, has faced opposition from the exchange industry, which claims that the accompanying procedures and systems are not in place.
While the meeting will include government officials, crypto trading platforms, and an industry association, a final decision on the tax deferral will not be made. Any changes to the initially proposed date would require adjustments in the law or the 2023 budget.
The government delegation to the meeting will include Kwon Dae-young, first vice minister of finance and economy, and Yoo Young-jun, a senior Financial Services Commission official. The participants will include Upbit, Bithumb, Coinone, DigitalX, and Gopax crypto exchange platforms, as well as the Digital Asset Exchange Alliance, or DAXA.
The revised crypto tax proposal is set to take effect in 2027, and it provides that profits generated from cryptocurrency trading exceeding 2.5 million won (approximately $1,856) per year will be subjected to a 22% combined tax. Additionally, the draft law proposes to prohibit the use of losses to offset gains in the cryptocurrency market.
According to one exchange representative, the final tax rules for different types of crypto transactions are still unclear, and the industry does not have enough time to prepare the necessary systems and processes.
The renewed discussion on the crypto tax comes as lawmaker Park Min-gyu tabled a motion to postpone the tax until the day when South Korea starts reporting crypto-related data to the OECD’s Crypto-Asset Reporting Framework. This date has been set for 2027, meaning that the tax reporting on crypto assets in South Korea can begin in 2029 if the motion is approved.
According to a survey conducted in late September among 2,423 Korean crypto investors, 82.9% of respondents have expressed an opinion on the potential postponement of the crypto tax. Moreover, 80.1% of survey participants have claimed to find the proposed 22% tax rate too high, and 72.7% have argued that the 2.5 million won tax-free threshold is too low.
The main stumbling block in the implementation of the new tax rules concerns the ability of the authorities to obtain information on crypto transactions, including those made on overseas platforms. It is unclear how the Korean government would gather the necessary data, which concerns not only the tax reporting but also other aspects of the proposed legislation.
The meeting between government officials and exchange representatives on October 19 might help to partially resolve the issues related to the taxation of cryptocurrencies. However, the final decision on the deferral of the crypto tax will be made by the legislative majority.
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