South Korean ruling party postpones introduction of tax on crypto profits

South Korea’s ruling party, the People’s Power Party, has officially proposed postponing the introduction of a tax on crypto trading profits in the country.

The proposal was filed on July 12, with the party citing that current sentiment towards crypto assets has deteriorated. According to the party, it is “not advisable at this time” to quickly introduce taxes on virtual assets.

Investors may exit market after tax introduction

The proposal highlights that investors are expected to exit the market if income tax is imposed on crypto profits, as crypto carries higher risks than stocks. Originally, the tax on crypto profits was to come into effect on January 1, 2025. However, if the proposal is approved, the introduction of the tax will be postponed to January 1, 2028.

In the run-up to South Korea’s April general election, the People’s Power Party pledged to delay the introduction of a tax on crypto profits by two years. The party said on February 19 that the country must first establish a comprehensive crypto framework before taxes can be levied. Taxes on cryptocurrencies should only be implemented once this basic framework has been fully established, the party said.

A representative of the party stressed that, unlike the stock exchange, there is no entity that is required to supervise crypto transactions. The party considers it necessary to spend two years on the development of such supervisory systems.

Bill is being postponed again and again

According to local media outlet The Korea Economic Daily, the plan to tax cryptocurrencies was originally scheduled for 2021. However, due to backlash from leaders and stakeholders in the crypto industry, the government decided to postpone the implementation until 2023 and then again until January 1, 2025, citing concerns over investor interests.

If the ruling party’s new proposal is adopted, the implementation of the cryptocurrency tax will be postponed by almost seven years from the originally planned start.

In South Korea, investors must pay a 20% capital gains tax if their annual profits exceed 2.5 million won (about $1,800). This threshold is significantly lower than that for stocks, where only profits above 50 million won (about $36,000) are taxable.