South Korea’s ruling party, the People Power Party (PPP), has recently announced plans to advocate for a two-year extension in the implementation of cryptocurrency taxation. This strategic move comes ahead of the upcoming general elections and aims to address the complexities and challenges surrounding the taxation of virtual assets in the country.
The decision to push for a delay in crypto taxation until January 2025 is based on the need for a solid regulatory framework to be established before enforcing taxation on virtual assets. The lack of a comprehensive regulated trading platform and the difficulties in income verification with crypto companies are significant hurdles that need to be overcome before effective tax collection can take place. PPP argues that delaying taxation by at least two years will allow for the development of a comprehensive system that is ready to handle the complexities of the crypto market.
PPP intends to propose the second phase of the “Cryptocurrency User Protection Law” during the upcoming 22nd National Assembly session to address the shortcomings identified in the initial phase of the law passed in June 2023. This legislation will focus on defining custodial service providers, incorporating listing systems, and establishing regulations for crypto exchanges to ensure comprehensive oversight within the virtual asset market.
While PPP maintains its commitment to taxing income from virtual assets, it is exploring adjustments to the taxation criteria to address criticisms of tax disparity between stocks and virtual assets. The party aims to harmonize the tax treatment of different asset growth strategies, considering the challenges in tracking investment amounts and returns for tax purposes. This move is part of PPP’s efforts to create a fair and equitable taxation system for all types of assets.
Finalizing the central electoral promises by February is crucial for PPP, as it indicates a strong commitment to addressing the taxation of virtual assets as part of its election campaign strategy. The party’s leadership aims to make a timely announcement regarding their stance on crypto taxation to demonstrate their readiness to tackle this issue effectively.
Under the existing law, income from the transfer or lending of virtual assets exceeding KRW 2.5 million is subject to a 22% tax, including local taxes. This stands in stark contrast to the KRW 50 million non-taxable limit for stocks, highlighting the need for revisions to the tax code to ensure a more balanced and equitable treatment of different asset classes.
South Korea’s ruling party’s decision to push for a further delay in crypto taxation reflects a strategic and cautious approach to addressing the challenges of taxing virtual assets. By focusing on regulatory groundwork, legislative improvements, and taxation criteria adjustments, PPP aims to create a comprehensive and equitable system for taxing income from virtual assets in the future.